Back to Basics

As we open applications once again for the next tranche of aspiring start-ups, eager to win a place in the 2015 Catalyst Centre, we thought it was time to go back to basics to help those considering taking their first step into the world of business. After all, applicants who are granted the opportunity to take part in our pitching day will have to convince the judges and their future mentors that they dont just have an original idea, but also the practical business brains to succeed.

We tasked David Bream, Director of SETsquared Southampton, who has guided many a fledgling business to fruition, to compress three months of seminars down into an overview of business essentials. He said: Too many people try to over complicate it, but good business is really all about getting the simple things right. Lets get back to basics its as easy as 1, 2, 3!” 

1. First off, lets talk about differentiation. Take a look at this diagram:

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Green is your company. Blue is your key competitor. The overlap is how the two businesses are the same (perhaps the same basic product) but the rest the bit that doesnt overlap – is where the magic happens! The rest is what makes you different, and, if you can find a group of customers that really value your USP then you have what is known as a compelling Value Proposition and hence you have a business! Above, the orange circle represents the universe of potential customers for your product pinpointing a segment within this that really value your USPs will keep you focused on your points of difference.

How do you identify this difference? Well, a good old fashioned SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is an excellent starting point. You may also want to check out previous blogs about creating a value proposition – in other words, what is unique to you. 

Remember too, that this doesnt need to be set in stone. You can change the nature of your offer and you can always target a different customer segment if you didnt get it right the first time, but naturally the more groundwork that you do to get it right first time, the better. Another essential thing that must be thought about at an early stage is whether to protect your intellectual property if youve created something that the world has never seen before. 

2. Next, lets talk about money.

As a start-up, its essential to not only be aware of all costs, but to be in the mind-set of running your company lean and mean from the outset. Old habits will die hard and it will keep you profitable! So, how do you know if youll be profitable?

Take your products selling price. Deduct the costs of goods (in other words, the costs of generating the product, parts, materials, manufacture and shipping). This will give you your gross profit margin. Then deduct your overheads (things like salaries and office costs) and youll be left with your net profit. This is the bottom line, the important bit that everyone who has an interest in your business will have their beady eye on. 

Its very tempting to massage the figures to fit of course, but its incredibly important to be realistic from the get-go or youll waste a lot of time, energy, momentum and money.

3. Finally, lets go to market.

Assuming you now have a unique product or service that is of interest to a group of customers and the numbers stack up, then its time to invest in sales and marketing. 

How do you find customers? The best way is always to go out and talk to people! Build relationships. Get your name known. Educate people on what youve got to offer and how it will help solve peoples pain points. Be very clear about exactly who your target customer is keep focused on the purple circle rather than the orange one in the diagram above! Do your research, and then engage with them.

Think always in terms of two-way communications. By taking this approach, you will learn valuable insights that youll be able to take back into the business to improve your products and service and facilitate future growth. Your early customers are vitally important for this so do what you need to, to get them to trial your product or service and act on their feedback. Remember though, that incentives only work if there is a reason to stay loyal afterwards.

And there you have it! Of course, there are so many other aspects of running a successful business: finding reliable staff, creating marketing collateral that really works, finding distribution partners, developing the next product or servicethese all come with growth. Get the basics right, and youll be working on these elements before you know it!