We are breaking down the best side hustles to start in the UK in 2023, but how do we define best? For us a side hustle needs to be profitable fast and require minimal capital investment to get off the ground. It also needs to be something you can fit around the general 9-5 and something you can potentially grow into a full-time gig in the future! So, with that in mind our list is focusing on the following key elements:

1. A growing market with few barriers to entry
2. Minimal requirements for capital investment and financing
3. Flexibility regarding hours

So, lets dive in shall we and break down the best side hustles to start in the UK.

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Putting together a Tender Exercise

Assuming you have a large and complex enough opportunity to put to market which would be attractive for potential suppliers to bid for then to secure Value for Money, you may be best off looking to run a tender exercise. Tender exercises are one of the key functions of good business procurement, as it evokes competition in the market and ensures organisations bidding for the work “sharpen their pencils” knowing that to win, they will need to have a more attractive proposal than their fellow bidders.

When would a tender exercise be appropriate?

Tender exercises are considered the heavy artillery in the procurement war chest and the big guns are only really needed for the big battles. Running a tender exercise for a small, non-core spend would be overkill and it is unlikely to get any prospective suppliers excited to invest time into putting together a response.

There is no hard and fast rule to know which contracts you should run a full tender exercise on, but there are some key criteria that can point you in the right direction:

1. Value – The monetary value of the contract is always an indicator as to whether a tender exercise is appropriate. High value contracts need due care and attention and assurances that the supplier is offering exactly what you are requiring. Organisations tend to set a threshold spend in line with their operational activity, typically £25k+. From a value perspective, you also have to consider the bidders view. Bidding against tender documentation takes significant time and resource not to mention the opportunity cost (bidding for your opportunity means they are committing resource that could be used elsewhere). You may feel a £5k contract is a lot to you and your business, but running a complex tender exercise is unlikely to attract many bidders as it simply isn’t worthwhile them committing the resource to it.
2. Complexity – If what you are purchasing has a significant level of complexity that needs to be specified, then it may be a necessity to run a full tender to ensure your bidders offers are matching exactly what you require. With a tender you can go into granular detail of exactly what service/functionality/product you require and introducing a very detailed specification, service levels and evaluation criteria will allow you to quickly map which suppliers can deliver to your needs. This documentation will also allow unsuitable suppliers to quickly disqualify themselves and not waste their time bidding for something they would be unable to deliver
3. Importance – This is more of a catch all. If the contract is of great importance to your organisation, it is likely to fit with one or both of the above criteria already. However, there may be some relatively low value and not particularly complex contracts that are absolutely imperative to your function. In this case you will want to explore what the market has to offer and ensure the supplier you go with has the level of credibility and experience necessary to continuously deliver to an exceptional standard.

How to put together a tender exercise

Once you have identified a purchase that requires a full tender exercise you will need to plan your go to market strategy. For instance, you will need to know where/how you are going to advertise your tender, who will need to be involved from an internal standpoint (key stakeholders and subject matter experts) and what your key evaluation criteria is going to be.

Finding bidders for your tender exercise

One of the easiest methods of advertising out your tender exercise is by conducting some of your own research. Research will give you an insight in to what suppliers currently occupy the market and their respective websites and content will allow you to gauge how suitable their likely proposals will be. Participants in the market will always be glad to hear about a new opportunity and simply dropping them a quick call/email introduction to enable them to register their interest is a very quick and typically very successful first step.

An alternative method is to sign up to and advertise on a bid portal. Countries tend to have their own rules and portals for bid advertising so it pays to do a little bit of research to find which portal is best for you given the jurisdiction in which you will be carrying out your procurement exercise. This method is likely to reach a much wider pool of potential participants, however you will have to take due care shortlisting such an extensive amount of potential offers. You certainly don’t want to be diving into detailed analysis of hundreds of responses and therefore you will need some criteria (size, location, experience etc) to disqualify participants in a quick shortlisting phase.

Internal Stakeholders

Internal stakeholders are a key aspect in a successful procurement exercise and it is vital that they are aware of and engaged with the prospective tender exercise. Within your organisation there will be a number of departments that will be affected by the outcome of a supplier selection, for example if you are tendering for a new financial software, the IT department and the Finance department will be key stakeholders with a vested interest in the outcome. IT will need to be consulted to ensure that prospective supplier offers meet key cybersecurity requirements and that prospective solutions could seamlessly integrate within the current IT infrastructure. Finance would also be the key end users and therefore would need to be actively consulted and aware of the user interfaces, functionality and prospective training that will be offered. Such internal stakeholders can help you identify what is important which will enable you to put together appropriate evaluation criteria when analysing supplier responses.

Putting together the key documentation

Once you have an understanding of where you are going to advertise your tender and have consulted with your internal stakeholders to gain more insight into exactly what is required and what is important, you will be able to move on to drafting your documentation.

In order to do this you will need to outline the specifics concerning your tender exercise. The documentation needs to highlight areas from requirements and priorities to timelines and evaluation criteria. The below framework should provide a useful foundation to get you started.

1. Specification – What is the product/service you are looking to procure? What are the specifics? Necessities? Desirables?
2. Term – What is the term of any contract you wish to sign, would this be a tender for a short term 1-3 year contract for a product and/or service or a longer term?
3. Key contacts – Who are the key contacts in your business concerning the tender exercise in case of any enquiries or requests for clarification.
4. Timetable – What is the timeframe within which you wish to complete the tender exercise? You should be careful to outline areas such as when the tender was issued, a deadline for the receipt of clarifications should the supplier have questions, a deadline for receipt of completed tenders, a deadline for evaluation and a target commencement  date.
5. Method of delivery – How do you wish to receive the completed tender documentation from each supplier? Will this be electronically? You should spell out exactly how a supplier should go about submitting their completed documentation.
6. Tender evaluation model – How are you going to evaluate the tender? Will it primarily be on price or will it be on quality/suitability to specification? You should outline exactly what you are looking for in the tender and attempt to apportion your weighting between cost and suitability (quality,, service levels, innovation and continuous improvement etc)
7. Legal disclaimers – It is good practice to include some legal disclaimers within your tender documentation. For example prospective suppliers through the tender process may gain access to sensitive corporate data and/or Intellectual Property and therefore including some basic legal disclaimers to guard against misuse of this information is good practice.
8. Disclaimer of cost – It’s good practice to include a legal disclaimer to state that your company is not in any circumstances liable for any tender costs, expenditure, work or effort incurred by the tenderer including if the process is terminated or amended by you.
9. Draft terms and conditions – It is likely you won’t just have a standard supplier contract to pull up for the particular product/service you are looking to procure, but it would be important to have in mind and spell out some contract terms you wish to see included (e.g. no volume guarantees, required liability levels etc)
10. Your rights – For example if you wish to make changes to the timetable, disqualify a tenderer due to a particular circumstance (e.g. misrepresentation) or withdraw or amend the details of the tender then you need to stipulate this under a company rights section. If you do not do this, you leave the door open for potential legal recourse in the event you decide to make changes.

Tender clarification questions

It is always important to put an initial phase in your tender exercise that allows prospective suppliers to ask questions about the documentation that has been provided and seek clarifications on any area that may seem initially unclear.

Ensure that your documentation spells out exactly who these clarification questions should be directed and which communication channel they should follow (email, phone call etc). Typically clarification questions should be directed to the procurement manager and sent via email. This leaves a clear auditable trail and enables the procurement manager to seek any additional information from relevant stakeholders that may be required to answer the question.

Once the phase is over, all clarification questions along with respective answers should be posted to each participant. This levels the playing field and ensures all parties are participating in the exercise with no asymmetry of information and therefore no discernible advantage to one party over another.

Evaluating tenders

Tenders should be analysed and evaluated in line with the criteria you specified. It pays to get your relevant internal stakeholders engaged at this stage too. Such stakeholders are subject matter experts and/or end users and will want to ensure that the prospective supplier offer meets their requirements.

In the evaluation phase it is also key to give yourself enough time to ask questions about the prospective suppliers response and seek any necessary clarifications concerning their offer.

It often pays to condense evaluations in to a presentation which highlights the key areas of each suppliers’ offer. This will enable you and your stakeholders to quickly discuss the offers and highlight which one meets all requirements and offers the greatest value for money.

Identifying a preferred bidder

Once you have evaluated the tender responses, you should be able to shortlist down to two participants. One of these participants will be your preferred bidder, meaning should contract negotiations go well, they will be your future supplier. However it is also very important to have another supplier as a reserve should negotiations break-down in the contracting phase. Doing it this way also puts some pressure on your preferred bidder to make some concessions during the contracting phase in order to secure the work as they’ll know you have another capable supplier waiting in the wings.

Contract negotiations with your preferred bidder often requires a lot of legal back and forth with both parties making acceptable concessions concerning key legal battlegrounds such as liability, termination and Intellectual Property. The phase should be given a reasonable amount of time to complete (at least 3 weeks) to ensure you retrieve the best possible outcome. It often pays to get some legal consultancy in this stage dependent on the nature of the contract, unless of course you have some in-house legal counsel.

Contract Award

Following the contract negotiation phase, you should hopefully have reached an agreement with your preferred bidder and now it is time to formalise and sign. When signatures are obtained you will now have completed your tender exercise and secured your supplier. It is good practice to file your contract in a contracts register for future reference if needed and ensure that your new supplier is entered into a suitable supplier management process to keep on top of their performance and engage with them over future opportunity!

Competitor Benchmarking

Competitor benchmarking is an often overlooked, but vital ingredient in the business mix. Through your business plan, you will already have a pretty sound understanding of the competitors in your market, but it is important to refresh this data and keep up to date with the developments of the market and the innovations provided by your competitors.  Not understanding how your competitors are innovating and transitioning in the market might leave you behind and cause you to relinquish market share by becoming less relevant to customers (think Blockbuster vs Netflix) which in turn is going to be very detrimental to your business’ position in the market.

To keep on top of competitor developments, it is wise to garner information from as many resources as possible including:

• Current News Websites – You can often setup key word or organisation alerts to notify you of any new content concerning your competitors as soon as it is published
• Trade and Industry publications – Trade and industry publications provide a neutral view of the industry and outline the key players along with innovations. Such publications therefore are a reliable source of knowledge that you can definitely apply to your benefit.
• Competitor websites and annual reports – Again you can often setup alerts and many competitors publish their own news/blogs which can help you stay up to date with their plans

Maintaining Market Knowledge

Another vital ingredient when considering competitor benchmarking is maintaining market knowledge. In the same way it is important to loop back and refresh your research on competition in the market, it is also a good idea to keep on top of market developments. Markets tend to develop over time and a customer’s preferences can shift in line with advancements in technology and shifts in social pressures (e.g. sustainability). This can create different dynamics in the market which in turn will create a number of pitfalls and opportunities for organisations that are operating in the space. If you are careful to stay up to date with the developments in the market by using news websites, trade publications and competitor websites you can keep pace with the market developments and ensure you use such change as a platform for opportunity.

Displaying information

If you are looking to secure investment in the future, it is very important that your analysis and research on the market is displayed in a concise and easily readable format. It is therefore prudent to get a few templates together that will ensure you are inserting the latest information into a format that is not only easily identifiable by a potential investor, but also easily managed and digested by you (nobody want’s to read through a wall of text!). Below are a couple of ideas created by simply using Microsoft Powerpoint which could be adapted to suit your needs.

Displaying a Market Analysis

The above template is designed to provide a quick overview of the market for internal business collaboration tools allowing in one very quick snapshot to surmise the following:

1. Nature of the Market – The market space for digital collaboration solutions displays fundamental characteristics of Monopolistic Competition meaning whilst there are a few small competitors, the larger ones command significant market share.
2. Emerging competitors – Despite the dominance of the bigger players, there is still evidence of emerging competitors. Such evidence is indicative of relatively low barriers to entry and is potentially being driven by growth in the market. Such growth is evidenced by the revenues of the major players trending upward.
3. Consumer verdict – The sentiment of the market regarding average user ratings suggests that the customers are happy with the services being provided, to enter the space therefore you would need to offer something significantly more innovative in order to ascertain a following.

Whilst it wasn’t necessary for this market analysis, you may also wish to include a trends section which pinpoints the emerging customer and technological trends in the space which may disrupt the dynamics of the market. For example providing an analysis of the video game space you would look to highlight a divergence from the traditional disc format to the newer streaming formats we are seeing emerge.

Competitor solutions comparison

Understanding the market and the biggest competitors within it is one step, but another key step in competitor benchmarking is to understand what exactly competitors are offering that is helping them to solidify and expand their position. Understanding the key functionalities, unique selling points and overall extensiveness of the competitors solutions is therefore paramount when attempting to derive barriers to entry and key aspects your solution will need to deliver in order to establish a foothold. I find a good and visual method to display such information is the use of the “Booz Balls” consultancy practice which you will often see utilised in many consultancy publications. Carrying on with our digital collaborations solutions analysis, this would look something like the following:

Key Functionalities

Comprehensiveness of solution offer

Using this method of displaying information again gives the reader the ability to make a number of conclusions in one quick comparison snapshot without having to read through pages of research. For instance by looking at the above I can quickly derive the following:

1. Core Functionalities – There are a number of core functionalities in the Digital Collaboration space and there is limited differentiation with many of the big players offering very similar functionality regarding their solution. Importantly there doesn’t seem to be any USP (unique selling point) amongst the solutions on the market.
2. Comprehensiveness – There is no stand out performer displaying a comprehensive offer in all of the areas analysed, however we can identify Workplace, Slack, Asana and Office365 as the best performers. We can also see that Confluence has the weakest offer relative to it’s peers.

Research is therefore a core concept when keeping up with market and competitor trends, but spending a bit of time creating a few templates that can be easily updated is also very important. Such templates can show core information at a glance which can help you to understand and digest the research you have conducted which in turn will allow you to draw conclusions and identify opportunities.

Marketing

There is a common misconception that marketing and advertising is one and the same thing, but marketing actually runs much deeper than a cleverly crafted advertisement and spans a much wider subset of considerations including the method of delivery, what to sell and where to sell it and how to price and promote. At the most basic level a clear marketing strategy helps to get your business’ product/services into the eyes of the customers you are targeting at the right price and through the right channel.

The Four Ps

If you have read about or heard about marketing techniques in business you most likely already have some knowledge of the “4 Ps”.  These “4 Ps” Product, Place, Price and Promotion (aka the marketing mix) provide a useful framework to reference when thinking about and developing a marketing strategy:

• Product – Product should get you thinking about the product/service that you are offering in the market. Are you breaking new ground with this and thus creating an entirely new market? Or are you simply looking to expand an existing one?  What are your key differentiators that you wish to demonstrate to your customers? How are you looking to package it? Is it a budget alternative? Or a luxury offering? Such considerations will feed into how you wish to promote and price your product as well as helping you envision a desired brand and customer experience.
• Place – Place covers two distinct aspects when putting together your marketing strategy including:
  • Where are you looking to sell your product/service? Different countries will have different cultures and legal guidelines whilst different areas within a country will have differing customer preferences (e.g. Buying power, age, lifestyle etc). You should have an idea of who you are looking to sell to from your market research in the business planning phase and as such should be able to focus in on the target locations of your intended primary customer base
  • How are you going to get your product/service to your customers? This is an area known as logistics/distribution and you will need to understand what channel(s) you wish to explore as a means of getting your product/service to your customer. There are, as always, a plethora of different channels ranging from indirect methods (e.g. wholesalers and retailers) to direct methods (Physical stores, e-commerce) and you can select a concentrated or mixed strategy dependent on your requirement.
• Price – This ties in nicely with your product and place overview as you need to ensure your pricing is not just competitive, but also correlates with the nature of your product and the customer you are targeting. If your product is a budget offering your pricing needs to ideally undercut the market and offer your prospective customers value for money whereas a more luxurious product should come with a price tag that doesn’t undervalue its image.
• Promotion – It is a deliberate move to list promotion as the final bullet point in the overview of the marketing mix. It pays to have a thorough understanding of your product, your customer, distribution channels and the pricing you can offer before putting together a promotional campaign that would fit with the product/service and create the kind of customer experience you are looking for. At the promotion stage it is also important to understand where your probable purchases are going to start looking for information, if you can place yourself at the forefront of their first initial touch point with seeking a product/service such as yours, you will be in an excellent position to convert the lead.

Overall a successful marketing strategy should look to inform, attract and engage your target audience, articulating why they should choose you over someone else by spelling out how your product/service serves the needs they have. Good marketing and a good product/service offering should then provide a foundation to build your reputation, sell more and ultimately grow your business.

How could you promote your product/service?

Social media – Social media has risen rapidly as one of the key and least expensive methods of advertising (depending on how you use it) and it is therefore paramount that your business have some form of social media presence especially on the big 3 – Facebook, Twitter and Instagram. Having an active account/page on each of these mediums can present significant opportunity, not only can your prospective customers find you easily, but it also allows you to run campaigns such as contests and influencer promotions (see below) whilst also engaging with other trending topics to boost visbility.

Hosting contests – Contests can be potentially linked to social media, but can also be run through other mediums and are an excellent and cost effective method of reaching a wide ranging audience. Contests often work via enabling customers to share your content in return for an entry into a prize draw – the sharer gets the potential to win something and you get inexpensive advertising. The drawback however is that this isn’t especially targeted and often content might be shared with individuals who are completely disinterested in your offering.

Gamification – Gamification seems to be a consistent hot topic in the world of business and involves incorporating gaming elements into a non-gaming context to improve engagement and encourage action. Many companies employ gamification principles in their marketing especially with things like loyalty schemes (e.g. Mcdonalds monopoly), but you can also find more innovative examples that tap into customers’ and/or employees’ competitive spirit and desire for reward.

Internet – Using your business website to generate leads should be incorporated into any promotional marketing you do. Often organisations do this through a combinations of Search Engine Marketing (paid advertising e.g. pay per click) and Search Engine Optimisation (optimising your website to ensure it gets a higher rank on search engines e.g. Google).

Post-purchase – Looking after your customers post-purchase is a necessity as ensuring they are happy with the product/service provided will ensure they are more likely to refer you to others and you can grow organically as a result. A happy customer is more likely to do business again with you in future and will often leave favorable reviews/testimonials which you can use in future promotions to enhance your business’ reputation.

Influencer promotions – Promoting your product/service through use of an influential person in the market can also be a quick way of advertising to your target audience. For example if I was launching a new fitness product, I could look at the most popular fitness influencers on the likes of Youtube and Instagram and strike a deal with them for some sponsored content.

Paid media – Paid media is a more traditional method of promotion including television, radio, billboards etc. This often involves paying a provider to air an advertisement for you for a specific period of time. Costs can rack up pretty fast doing this, but it gives you the opportunity to advertise to a significant base of prospective customers very quickly. In that regard, if your idea is relatively innovative in a relatively new market with only a few other small players, a paid media promotion might just give you an edge and push you into a customer perception as a market leader in the space.

Referrals and affiliates – Referrals allow some of your existing customers to bring aboard new customers in return for a future discount or other incentive. To incorporate such a program quickly you might want to use a referral program software or if you are familiar with coding you can put this together yourself. Affiliate marketing is slightly different in the sense that recommendations may come from individuals or organisations that are not necessarily your customers, but who will promote your brand and provide prospective customer leads in return for a commission should that lead turn into a successful sale.

Expectation bounce – Exceeding your customer expectations can be an excellent way to bounce your reputation as it enhances your image as a quality business that not only delivers what it says, but goes the extra mile to exceed an expectation. A good example of this is Amazon – Many times they quote a delivery date 2-3 or sometimes more days further out and then end up delivering it early. In this regard they set an expectation; which they then exceeded; which in turn made you happy and gave you the impression they went the extra mile. If any issues occurred in Amazon’s delivery schedule then you likely still would have received your package in the expected timeframe and therefore still would have been happy.

Free framing – Samples, data, knowledge etc can all be given for free to attract an audience. With this technique you will essentially be giving away something that is desirable to a target customer for free as a vehicle to sell something else at a premium. For instance you might look to provide a website which looks to educate an individual on a subject e.g. the stock market. The free level of this information will be basic level, however you can up sell more premium content e.g. detailed business analysis for target stocks.

Measuring ROI when Marketing

There are a number of organisations that may treat marketing as a necessity, but monitor and control the cost centre with little or no diligence (I’m not sure how often company branded mugs result in greater sales – but I see them quite a lot).  Marketing campaigns should be clear, targeted and designed with traceable metrics to measure success.

Now there isn’t a one-size fits all approach to measuring ROI concerned with Marketing as it simply depends what objective you have in pushing the campaign. Typically, you want your marketing to drive customer awareness in order to subsequently drive more revenue; however it is important to spend some time to define exactly what it is you want from the campaign and the time horizon to measure its success.

For example I might wish to roll out a contest in order to retrieve new customers and drive some further revenue in the short term – Consequently my measures could be:

1. Revenue increase of 5% within 3 months of the campaign
2. Drive 2000 new unique page visits over the next 3 months

If I achieve these measures then my campaign was successful in line with the objectives I set for it, if not it could be back to the drawing board in order to test a different approach.

When setting your objectives/metrics for each marketing campaign you should look to ensure they follow the SMART principles – Specific, Measurable, Achievable, Realisitic and Time controlled. Ensuring your metrics cater to these elements will ensure you can trace and measure the success of your capital outlay.

Identifying and Assessing Business Opportunities

Identifying and assessing business opportunities is a key skill should you wish to set up a company. When you first identify a potential business opportunity and believe in its potential, it is important that you begin assessing its credibility through a logical approach rather than being blindsided by confirmation bias. Often there are lots of potentially great ideas out there, but you need to think about the resources you have available, the nature of the market and potential route to sustainability. Reading through this section should begin steering you in the right direction, ensuring that you don’t spend too much time or resource on an idea that in practical terms won’t work.

Identifying Business Opportunities –

The Quick Checklist

A checklist is a very simple, but very powerful tool to employ in any area of life, from picking up the right items at the supermarket to managing a project through logical sequential steps to even completing pre flight checks. I therefore like to employ a very simple checklist at the inception of an idea to avoid wasting too much time and effort on developing something that is likely just not going to work. This checklist is as follows:

You would simply go through the checklist and assign a score from 1-10 for each item 1 being not attractive at all and 10 being extremely attractive. I normally then dismiss any idea with a score less than 40.

For example I might think of starting a gym and my score could look something as follows:

Assessing Business Opportunities –

Break Even and Price Competitiveness

To test an ideas initial feasibility it is always worth assessing its viability through the lens of cost and potential profitability (assuming this is designed to be a for profit business, however this analysis is also useful for non-profits sustainability). Often I do this through a quick break even calculation.

For example if I was going to start my own gym I would gather initial thoughts on the costs involved e.g. premises, marketing, equipment, employees etc. Let’s say:

1. My premises costs, utilities and other overheads came to £10,000 a month
2. My initial investment for equipment and marketing was £8,000.
3. I know therefore my first year cost is going to be £128,000.

Researching other organisations in the same market reveals an average price of £45 a month membership. I decide my business is designed to be a budget offering so I want to undercut and charge £40.

With that in mind, just to break-even on a monthly basis I would need at least 250 paying monthly customers (£120,000/12/40). At that rate I would be able to cover my monthly outgoings, but could never recoup my initial £8000 investment, consequently I would need to attract more than 250 customers to my gym in order to start seeing a return.

At this stage, if I believe it simply isn’t feasible to get at the very least 250 customers, then the idea is simply not viable.

Assessing Business Opportunities –

Customer Acquisition Cost

The customer acquisition cost (also known as the allowable acquisition cost) is closely aligned with marketing. Basically it is a method of attempting to compute the amount you can invest in trying to attract a customer to your product/service whilst still maintaining adequate profitability.

If your allowable acquisition cost comes in at £200 per customer, but you are estimating that you’ll need £300 per customer to get the message out there, then the idea may not have the ability to deliver a return worth the investment from a time, capital and resource perspective.

You can calculate the allowable acquisition cost as follows:

For example let’s say:

1. My expected average value from a customer is £1000 over a 2 year period;
2. To deliver that to them it will cost me £200;
3. My total expected overhead per annum is £100,000;
4. I forecast attracting 200 customers in the period and I am looking to achieve a 50% profit.

My calculation therefore is as follows:

Average lifetime value per customer (£1000 ) minus the cost to deliver that value (£200) = £800

Overhead per customer is equal to £100,000/200 = £500

I therefore have £300 (£800-£500) in revenue per customer before marketing.

As I want a 50% margin, I can only afford to spend 50% of that £300 on attracting a new customer giving me a maximum allowable acquisition cost of £150.

From a budgeting perspective, over the 2 year period I can’t afford to spend more than £30k on marketing (£150*200). If my forecast spend is much higher than this then the idea is likely going to be too costly to attract market share in the time horizon set for it to be profitable.

Assessing Business Opportunities –

The Shadow Test

If you feel you have landed on a pretty solid idea, that passes the above tests you may be able to employ the concept of a shadow test which is a relatively risk free way to understand whether there is really a market for it.

A Shadow Test works especially well in industries where significant capital is required upfront e.g. technology. For example, Fitbit, at its inception created a website for its fitness tracking product and marketed it out taking preorders without actually having a workable product to sell. This significantly reduced their cost and their risk as they hadn’t invested capital in the creation of a product that potentially wouldn’t sell. The interest garnered through this shadow test process provided evidence of a market which enabled them to secure investment and begin mass production.

Next Section: Creating a Business Plan

Sales

Sales can solve quite a lot of business issues, if you are selling, then it shows there is a market for what you are delivering and if the numbers are there then you are a decent way in to running a successful organisation. Obviously sales go hand in hand with other areas of the business which also need to operate efficiently (e.g. Accounts receivable – ensuring your customers are actually paying for what they are buying), but it is important at least that your business is attracting enough of the market to generate sustainable revenue.

Sales Strategy

In regard to sales it is good practice to ensure you have a resolute plan and this should go hand-in-hand with your marketing strategy.

You need to have a solid idea of who you are going to target, how you are going to target them and what sales tactics could be used to attract their attention. This is the same for both a business to business organisation and a business to consumer organisation – it is a necessity to know who your target base is, whether that is a particular customer segment or a specific target vertical, the sales planning process will also help you identify which products and/or services could be targeted at each of your target customer bases in order to maximize sales.

The keys to developing a successful sales strategy are therefore as follows:

1. Identify the right customer

Often when you start a business there will be a disconnect from who you thought was going to buy from you and who is actually buying from you. It’s important to refine that customer profile and verse your sales team on their characteristics, that way they can tailor their approach to target the customers that are more likely to convert from a lead to a sale.

2. Unify Sales and Marketing

In many organisations, the Sales and Marketing functions work in silos, however a unified approach is needed. Feedback loops between the two areas will create a more targeted marketing solution giving the sales team the fuel they need to grow revenue and increase market share.

3. Hire the Right Team

You need to hire the right people that are going to fit with your brand and ethos. Creating a list of qualities in your ideal salesperson and using it during the interview process is a good start when looking for the right individuals. On an ongoing basis the environment should be challenging, but not overwhelming and provide the arsenal of templates, tools and training to keep the sales engine running.

4. Put the right process in place

Defining a sales process will create a structured set of repeatable actions that lead to a sales conversion. Initially you might not have a set definition, but it is important to track your actions and understand what worked, how you initially approached the customer and what steps (free samples, demos, trials, meetings etc) worked to turn that prospect into a paying customer.

5. Refine and adapt your strategy if needed

From your cash flow and financial forecasting you should have a rough idea of the level of sales to break-even and subsequently turn a profit and from such analysis you should set specific and measurable objectives as to where your sales need to be at particular time horizons in order to keep you on track. If sales are not reaching these target levels then you may need to switch up your strategy to ensure the level of growth you had forecast is met or exceeded in order to keep you on a path toward success.

Take care with the use of sales promotions

Often when sales aren’t quite on track companies tend to race for sales promotions and discount periods to boost sales in the short term in order to hit targets, however frequenting such a strategy is typically a recipe for disaster.

Companies who do this on a consistent basis are essentially borrowing against their future, accepting significantly cut margins in the short term to artificially boost sales data, this also causes a requisite increase in spend on inventory to manage against the demand and if the promotion isn’t as successful as initially anticipated then the organisation will have tied up significant capital in needless inventory.

Even if customers do buy at the promotion price, it generally means that they will buy less in future as they are “stocking up” at a discounted price meaning the companies’ sales in future will suffer as a result and they will have sold more in the short term at a cut margin rather than selling consistently at a higher margin over the longer term.

Promotions also have a requisite impact on the purchasing side, as attempting to extrapolate prospective increases in demand is near impossible and generally leads to a company over purchasing and thus being in a situation in which further discounts are required to move excess inventory levels. Companies who get sales promotions right typically stick to very regimented sections of the year e.g. around holidays such as Christmas.

A Focused Offering

Building your product/service range organically is also a necessity from a sales perspective, you want your products and services to have focus and be pushed strategically rather than trying to sell everything and anything.

Smaller concentrated product/service ranges initially can give your business not only focus, but identity, your marketing can be more targeted and your sales department will be able to keep track and push concentrated programs to the market, purchasing will also be able to concentrate its efforts on managing a smaller range of products/services and investing the capital where it needs to be.

A broad wide ranging catalogue or products and/or services can be cumbersome for even the largest organisations, so for a smaller business it is definitely wise to have a small concentrated range to reduce waste and from there build organically.

Market Analysis – Tips and tricks to sizing a market

When you begin conducting a market analysis, you would be forgiven for feeling a little lost and not knowing where to start, at its core, market and industry analysis is big business and takes a lot of work, however you can use some simple rules of thumb to garner an idea of the potential size of a market and its makeup.

Do you even need a Market Analysis?

Information that goes into a market analysis often isn’t publicly available and therefore the process of putting together an in depth analysis can be frustrating and time consuming with reports from credible sources costing a fortune. So you may wonder, is it even worth conducting a market analysis?

In short, it is always worth conducting some form of research even if you only intend to be a small business in a particular niche. You don’t need to put together consultant worthy documentation and in depth statistics, but you should at least understand the main competition and a rough estimate of the size of the market and its respective growth rates. Even a very brief analysis will give you insight into the customers in the market, their buying habits and their price sensitivity which is all invaluable information when setting off on your business journey.

More in depth analysis will however be required should you wish to attract external investment and/or if you are looking at a wider market. Investors will want to ensure you understand the market and its growth rates and have done sufficient research to prove that your concept can not only be successful in the short term, but also expand into a growing market and produce above average returns.

What should be included?

Your market analysis needs to consider the key aspects of the landscape within which your business will operate. This can include:

1. The size and growth rates of the market – Understanding the size of the market currently and its projected future growth will provide insight into whether your business is sitting in an attractive market with a viable future. If you find your business is tailored toward a large, but stagnant/declining market, it may not be worth significant investment and perhaps a business fitting into a smaller growing market would be a better venture to invest in.
2. Your target market – A market tends to be made up of a number of different customers, each with different budgets and different requirements. In this section you need to focus in on exactly who you are targeting, what is their budget? And how does your solution solve their problem? Knowing this information will allow you to tailor your marketing and sales strategy and therefore maximise your return. With a target market analysis you should use characteristics such as age, income and location to fully understand who your customer is along with their psychographics such as buying habits and interests. Knowing who exactly your customer is will enable you to understand why your solution is perfect for them and allow you to get the message out there.
3. Competitor analysis – Understanding your competitors is a vital step when setting up a business. It allows you to understand the landscape, their strengths and weaknesses, barriers to entry and your unique selling points. When you first enter a market, the competition is likely to react, especially if you start building a following. You need to understand what separates you from them and how you can keep pushing your concept over theirs should they try to pivot their strategy. Even when you are an established player in a market, knowing your competitors and their innovations is still vital and will ensure you keep up with trends and stay relevant to your customer base.
4. Projections – You will have an idea of the size of the market from research and its prospective growth rate, but it is important to put this information into context. For instance how much of this initial market are you likely to be able to take? How are you going to do it (Marketing/sales strategy)? Make sure to be realistic in this projection and note that entering a market will often come with a competitor reaction.
5. Regulations – The market analysis should also cover regulations and other legal considerations with the market. You will need to understand what these regulations are and how you are going to comply with them. Following that, you will also need to understand the cost of compliance, both initially and ongoing and ensure you have budgeted appropriately for it.

Where can you find information for your Market Analysis?

• Search engines – Simply using a search engine to identify websites that size a market for you is a reasonable first step, however you should be careful as to the credibility of the source. If you can find 3-4 sources that are all saying similar or the same thing and one or more of these is credible such as a large consultancy/accountancy/industry publisher, then you should have a relative amount of confidence as to it’s accuracy.
• Professional publications – The big 4 accounting firms (PWC, KPMG, Deloitte and Ernst and Young) or large consultancy firms often publish articles and reports on certain markets and these would be a reliable source to begin conducting your own analysis. Such reports provide key insights and analysis based on reliable sources of data.
• Competitor annual reports – Often competitors may cite the total value of the market and its respective growth rates in its annual report which you can verify with further research. If not, you can also garner this through other information in the report for example a competitor may stipulate it has 20% market share on revenues of $500m meaning the total value of the market would be estimated at $2.5bn.
• Extrapolating – Knowing the average spend per customer and the volume of customers is also a way to derive an estimated total market value and you can also derive a total potential market value if you consider census data and population growth trends in addition. Whilst this may not give you a completely accurate picture, it can be a good reference point when conducting further research.

Business Plan

A failure to plan is a plan to fail. As the old adage goes, we’ve all heard it and of course the countless variations which basically stipulate the same. You are destined to lose/fail without a plan.

On the contrary this isn’t strictly true. Ideas without resolute plans have a gone on to be a great success. However such ideas have often had a significant amount of luck underpinning their journey and may well have made it to their destination faster should a plan have been in place.

Typically however the hypothesis holds and many entrepreneurs/businesses fail to plan their ideas comprehensively enough. Missing key pieces in the business puzzle and ultimately ending with an unsuccessful outcome.

This section is designed to guide you through the key areas of a business plan, including:

1. What should be included and the key information required in each area
2. The key uses of the business plan
3. Tips on displaying information clearly and concisely

What should be included in your Business Plan?

Your business plan is a key aspect in not only fully exploring your idea and the various potential opportunities and pitfalls, but it is also vital in attracting any outside investment that may be required. From that regard your business plan needs to be concise, well-structured and easy to follow. Along with having the necessary level of detail for a would-be investor to make an informed decision.

Executive Summary

Those versed in the art of writing an executive summary will be familiar with the format and the typical trick of always writing this section last. The executive summary provides a concise overview of all of the key material. From the perspective of a business plan therefore the executive summary should cover the key details and conclusions. Which should include conclusions relating to the opportunity, the market, the competitive landscape, the strategy, the risks and the financial forecasts.

Relevant skills and experience

Typically when you come across an idea it will be within a field that you are familiar with. Therefore it is important to try and demonstrate your knowledge and transferable skills in this section. That’s not to say you need very significant experience in the particular market/area your idea is in and it really depends on the nature of the business idea as to how much weight this section needs to have. Having direct and significant experience in the relevant sector is vital for certain concepts. For example, setting up and attracting investment for a new construction firm would be pretty difficult without prior experience in the construction industry. However, other markets do not necessarily require such experience. Instead, this section should focus on how your relevant skills will contribute to the success of the idea.

Business Plan – Market analysis 

A market analysis is vital in helping you to understand the dynamics of the market you are looking to enter including the size, market potential, growth rates, key players and customer demographics.

Market sizing:

With market sizing, you always want to start at the very top and dilute down to where your niche sits, this gives a thorough overview of the total market and enables you to easily assess the overarching potential as well as other niches you can look to expand into in future.

For example if I was attempting to launch a new piece of fitness equipment I would initially look at the size and growth rates of the global market for health and wellness , from this you can then derive the size and growth rates of the  geographical market within which you wish to locate and from there derive the fitness equipment segment.

Market sizing like this will give you full scope of the entire market and with the respective growth rates in your arsenal you will be able to see the emerging niches and how your company fits. Having that knowledge will ensure you are aware of the risk of related market niches which may impact on your market and/or present a good opportunity for partnerships. For more information on market sizing and some tips and tricks on finding and presenting information please visit our cheat sheets tips and tricks to sizing a market here.

Market Dynamics:

When we talk about the dynamics of a particular market. We are generally considering a number of key variables that underpin the makeup of the business environment. It is important within your business plan to provide a summary of these market dynamics. along with a consideration and key conclusions as to how you will operate within the market from a strategic point of view.

• Growth rates – The projected future growth of the market is an extremely important aspect to analyse when assessing your idea. A market characterised by high growth rates and high future growth potential is a far more attractive prospect to enter than one with stifled growth or worse still, one in decline. High growth rates will generally mean there is potential for new market entrants to not only enter the environment, but also gain some traction and market share with plenty of opportunities to attract a growing customer base. A market characterised by slow growth rates or a declining market base is going to be very difficult to enter. The large players will employ strategies to protect their existing market position and a decreasing or stagnant customer base presents little to no opportunities for traction.
• Key customers – Depending on the nature of the market, there can often be some significant key customers you should target. This is especially true for organisations specialising in business to business operations. A clear overview of who these customers are, their budgets, their requirements and their key contacts will all be useful information when attempting to build a strategy to get them buying from you rather than any competition.
• Customer niches/Market segmentation – Market segmentation is vital to understand the full dynamics of the environment. Generally market segmentation focuses on large consumer markets in which core customer characteristics such as age, wealth, education, values etc (demographics) make up various niches. Specific organisations and/or targeted marketing material can address such niches. For organisations specialising more in business to business operations, they can employ similar exercises.. Such exercises would need to focus on areas such as size, industry function and values.
• Key partners – Is the market characterised by many mergers, acquisitions or joint ventures? If so look at the key deals that have taken place and understand whether more market consolidation is likely. Such deals can present significant opportunity, but also create bigger risks if an organization creates a monopoly in the market.
• Key players/nature of competition – Knowing who you are up against in the market as well as their key products/services is vital. Understanding and tracking what your key competitors are doing will keep you ahead of the game and also provide significant potential opportunity to outmaneuver them on various market developments.
• Key trends and future trends – Knowing the key and future trends both in terms of services/products directly attributable. As well as other innovations which could make existing processes in non-core areas more efficient e.g. automation software. Is essential when keeping informed on market developments.

Business Plan – Assessing the Competition

When thinking through a new idea, you definitely need to know your enemy. Fully assessing the nature of the competitive environment and the size and resources of your direct competition is therefore a very useful exercise both initially and on an ongoing basis.

Such an exercise will allow you to understand their position in the market and frequently benchmark your organisation. This can make for quick reassessment of your market position and strategy in order to react to the competitions maneuvers. The following key areas provide a useful template of what you should be looking for when assessing your competition:

Market reach – Revenue and Profit (if possible segmental breakdown of current revenue streams)

Current Clients – If applicable and as far as possible – often information may not publicly available

Service Offering – Main products/service offerings along with omissions (what don’t they address?)

Market segments – What are competitors focusing on (any upcoming areas that seem to be a trend?)

Contract Wins – If applicable, what, if any major contracts have your competitors won in previous months

Mergers/Acquisitions and Partnerships – Has your competition shown appetite to invest in such activity? Is the market consolidating in any way?

Portfolio Innovations – Have there been any key portfolio innovations by competitors in the recent past? Do they have any in the pipeline?

Business plan – Sales and Marketing

Once you have completed a thorough market and competitor analysis as per the above steps. You should be in a pretty strong position to understand which customer profiles will find your offer most appealing.

This is then when a strong Sales and Marketing strategy needs to be developed. Such strategy should be designed to specifically target the sections of the market that are most likely to purchase. If your customers are big social media and technology users, there is probably little point in throwing out a Newspaper article. Likewise if your target customers are less tech savvy, a digital marketing strategy may not be the best idea.

This is definitely a core component of your offer, if the right people aren’t aware of it, you will never get any custom. Marketing is imperative in getting the word out there. That being said however care needs to be taken to ensure you are getting return on investment from marketing materials. Often many organisations waste money on somewhat useless material. See our Marketing section for tips and tricks on how to get things right.

Business plan – Operational and legal considerations

It goes without saying that you are going to need to think through exactly how your business will operate on a daily basis. Especially from the perspective of software and systems, logistics, HR, locations and of course cash management. In addition to those general considerations you will also need to understand and plan out any legal considerations. For example copyrights, trademarks, customer contract templates, supplier contract templates etc. Have a look at our Basics of Commercial Law section to find a more detailed view of the legal considerations.

Business Plan – Business Risks

A risk section is also a core component in a well-developed business plan. Good risk planning ensures you consider both the direct risks and the potential risks concerned with your business concept.

For example, you may decipher that seasonality will impact your business and, consequently, inhibit your revenue. As a result you may look to relieve the burden on cash flow by securing the use of a suitable financial instrument e.g. an overdraft facility.

Business Plan – Structure

From a structure perspective you need to consider two elements, company structure and managerial structure.

Company structure is a vital aspect to consider and can affect a wide range of core areas. Including how much you pay in taxes, your ability to secure financing, the paperwork you need to file and your personal liability. Researching how to secure any relevant permits, licenses and tax information is a key first step in deciphering the company structure you wish to choose and careful consideration needs to be taken when understanding the advantages and disadvantages of the various business structures that can be adopted. See our Business Structure section for further details on the types of structure you can go for.

From the perspective of managerial structure, this is more concerned with Human Resources and how you manage staff. Here, you can adopt hierarchical or a more fluid matrix solution. Again there are advantages and disadvantages of the various managerial structures on offer. Careful consideration should be taken before deciding therefore.

Financial plan and pricing model

Naturally everybody’s favourite topic…But it is absolutely essential that you have a hold on the numbers when planning your idea.

There are many considerations when putting together your forecast financials and you will need a firm understanding on areas such as break-even, ROI and cash flow. In basic terms though, you will need to understand whether your idea has the potential to generate a return and the level of cash reserves that will be needed to function on a day-to-day basis.

For some tips and tricks on how to go about forecasting and the typical statements you will be looking to produce see our Financial Forecasting and Price Modeling section.

From Business Plan to Reality

So you have carefully crafted the perfect business plan and now have a good understanding of the potential customer you want to go after as well as the competition and opportunities in your market

….What now?

Use your business plan as a guide

Your business plan should act as an initial guide to get your ideas structure in place. Throughout the research you have conducted. You should have identified what your goals are and have a much more detailed knowledge of the market and competition. The plan will also help you with the following:

• What business structure is best – From here you can then research how to go about setting up such a structure in the area you wish ensuring you abide by legislation and tax rules
• How to market to your target customer base
• What legal considerations you need to be mindful of e.g. Copyright, trademarks, standard terms and conditions etc
• What assistance you may require (e.g. consultancy) and what help for new business or SME’s exists in the area.

Adapt your business plan to suit reality

Things change and can change very quickly so being flexible is paramount in business and you need to set aside time each month to review progress against your forecast and plan. This will allow you to identify issues and pivot quickly to alleviate any issues or take advantage of opportunities.

With that in mind your business plan is a “living document” which you need to regularly review to match reality. Through the process of review you will have time to gather your thoughts and analyse what is working and what isn’t. In turn this will ensure you can continuously point your business onto the path of success.

Next Section: Creating a Business website