Typical Problem Series: I don’t really know much about my market

market

 

“My business is doing really well. My customers all know me by name and trust me to do a good job. I don’t know much about our competitors, but I’m sure they aren’t doing as well as us”


Many small businesses struggle with a fundamental lack of understanding of their markets, customers and competitors. You’ll ask owner-managers how big their market is, and they have no idea. You’ll ask where the opportunities for the market are. They will talk about where they sell to, but they probably won’t know how many of these types of businesses there are in their patch, and where they are. You’ll ask how often people tend to buy the product they are selling, and who would make the purchasing decision, and they don’t know.

 

Often, they will clearly know who they deal with. It will be a case of: ‘I know John, he knows me. If he needs something, he knows where to come. He knows I will be honest with him and will do a good job.’ But they won’t be able to say anything about the structure of their industry or market. They will be able to tell you who supplies alternative solutions, but not how much business they do, and whether they directly compete with their business.

 

Many small businesses do not have any key account management processes in place, or any regular contact to ensure they get the most out of the customers they already have. Everything can tend to be very scattergun. Perhaps they will decide to go to an exhibition. You’ll ask why, and they will say: ‘Oh, we get lots of enquiries at that exhibition. Lots of people stop by and talk to us.’ You ask how much business those enquiries generated, and they don’t know, because it wasn’t documented. Other businesses will spend £30,000 a year on having an advert in a trade magazine but, when asked: ‘How much business did that generate?’, the answer comes back: ‘Well, it generates a lot of awareness’. How much? Who is coming to you and giving you business because they became aware of you through this magazine – and how do you know? Often companies are very reactive, but have no real idea of who their ideal customer is and of who they should be targeting next and trying to find people like that.

 

Often, businesses start because the now owner-manager spots an opportunity. This usually results in a very focussed businesses that delivers a specific service or product to one customer or client. As the business grows, it is important to keep this focus in mind. For businesses to truly be successful, they need to know what they are really good at, how they make a difference, and how to attract new clients like the one they started out with. This informs all areas of the business, not just communications output, but key account management, how they organise their sales activity, and how they think about developing their portfolio.

 

If a business is looking to develop a new product, careful consideration must be given to where the target market is for that product. It isn’t enough to just have a really good idea. It must be a really good idea that will actually sell. If the product is going to be cheaper or smarter than another product that company already sells, this research will be vital in determining if the development could cannibalise all or part of the existing business.

 

I often ask the owner-managers: ‘When was the last time you visited your top 10 customers?’ It’s a bit of a trick question, because most people don’t visit their good customers – they spend all their time troubleshooting the difficult ones. As a business owner, you have got to be on top of the numbers. You don’t have to be an accountant, but you do need to have some idea of who your best customers are.

 

Another related problem I often see in businesses that come on the Business Growth Programme is a large and unwieldy portfolio of services or products. While a larger portfolio can be seen as reducing risk within a business, one that is too large or inappropriately managed will steal management time. With the business team’s attention divided across potentially completely different markets, it can be difficult to determine what is really making money for the business. Often it may be that the areas towards which you are devoting the most focus are the least profitable.

With thanks to Mike Meldrum

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