Entrepreneurship M2 SLP for Paula Hog

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Chapter seven The market

That the size and availability of the market is of major importance to

the budding entrepreneur was emphasized in Chapter 1. However

good your product or service and however well managed your busi-

ness, you will never achieve success unless:

you have a market of adequate size;●●

you have identified your customers;●●

you know what they really want;●●

you know how to reach them.●●

The marketing history of one Bruce Entwistle can be used to illus-

trate the above points.

Bruce had invented a simple little kitchen gadget. Having made a

prototype, he carried out some basic market research into its accept-

ability to the end user. What he did was to ask as many housewives

as he could contact whether they would be prepared to buy one and

how much they would pay. Having satisfied himself that the product

would sell, he considered the next step.

The housewives of the United Kingdom obviously could not be

his direct customers. He could not make a living by going from door

to door with his inexpensive little gadget. The costs of tooling up for

production meant that he would have to sell the gadget in tens of

thousands to make any profit.

Selling large quantities of any line costs a lot of money, however

it is done. Bruce was going to be hard pushed to cover the tooling-up

costs for production, so he had to reject ideas such as employing a

team of door-to-door salespeople or starting a mail order campaign.

He had to reject, too, the idea of selling through individual retail

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Co py ri gh t © 2 01 1. K og an P ag e. A ll r ig ht s re se rv ed . Ma y no t be r ep ro du

ce d in a ny f or m wi th ou t pe rm is si on f ro m th e pu bl is he r, e xc ep t fa ir u se s pe rm it te d un de r U. S. o r

ap pl ic ab le c op yr ig ht l aw .

EBSCO Publishing : eBook Business Collection (EBSCOhost) - printed on 7/12/2017 5:00 PM via TRIDENT UNIVERSITY AN: 359392 ; Blackwell, Edward.; How to Prepare a Business Plan : Create Your Strategy; Forecast Your Finances; Produce That Persuasive Plan Account: s3642728

The Market 119

shops. The shopkeepers could not be his direct customers either, as

it would be far too expensive to set up the necessary organization

and employ sales representatives. Eventually he decided to approach

the buyers of one or two chain stores. They were interested. They

told him what modifications they wanted made to his design and

what terms of sale and delivery they required. He negotiated suffi-

cient orders to set up his business and go into production.

Bruce Entwistle had fulfilled the criteria set out above:

he had satisfied himself that there was an adequate market ●●

among the housewives of the United Kingdom;

he had identified his customers as the buyers of kitchen items ●●

for the big retailing multiples;

he had made his product and terms acceptable to those customers;●●

he had found a path of distribution to his end users.●●

Let us consider how the people in our examples tackled the market.

The situation of Alexander Battersby (Example 3.1, page 36) was rela-

tively simple. He knew there was a market in Ourtown for joinery.

His uncle George had been earning a living as a joiner for many years,

and Alexander was taking over his business. Alexander knew there

was competition but trusted in his skill to meet it. One can criticize

him on two counts: first, because he did not make himself aware of

his customers’ feelings (see Chapter 12), and, second, because his

efforts to sell his services were not sufficiently positive, relying too

much on word of mouth and a rather vague advertising policy.

Rosemary Rambler and Muriel Tonks (Example 5.2, page 81) had

done their homework on the market before they made their decision

to start. They selected the sort of customers they thought would buy

their product and went out and met some of them. They not only

confirmed that the market was there; they also got some firm orders.

One would not expect marketing to be their major problem. Indeed,

their market was a very wide one and apt for the use of the internet.

As we shall see, when these two dipped their toes into this market

the results were spectacular.

Nicola Grant (Example 3.2, page 50) had her market defined for

her. It consisted of the customers coming into Mr and Mrs Smith’s

grocery shop. Her problem resolved itself into deciding whether this Co py ri gh t © 2 01 1. K og an P ag e. A ll r ig ht s re se rv ed . Ma y no t be r ep ro du

ce d in a ny f or m wi th ou t pe rm is si on f ro m th e pu bl is he r, e xc ep t fa ir u se s pe rm it te d un de r U. S. o r

ap pl ic ab le c op yr ig ht l aw .

How to Prepare a Business Plan120

market, or even a practicable extension of it, would be large enough

to pay her overheads and yield a sufficient profit. Nicola decided it

would not. If Nicola had been intending to open a new shop rather

than buy an existing one, she would have had to involve herself in

much more elaborate procedures: finding out how many shops were

selling her type of goods in the area, how many possible customers

passed the door of the premises she had in mind and so on.

Robert Herrick and Deirdre Williams (Example 4.2, page 63), buying

Lamplights Electrical Store, were acquiring a ready-made market;

but at the same time they were going to invest a lot of money in

expanding one aspect of the existing business. Robert was already

in the trade and knew the local scene well, but he still went to the

trouble of visiting 30 out of 49 of his potential customers. He was

able to make an estimate of the total trade available to him. His

contacts convinced him that he would be able to obtain a sufficient

proportion of that trade.

The market research of the inventor Marcus Garside (Example 5.1,

page 80), was necessarily more perfunctory. He knew there was a

need for an improved seat-belt reel, but he had to take a chance that

there would be a market for his particular product when he had

designed it and that there would be a customer for his patent.

The makers of the left-handed snooker cues (Example 5.3, page

92) carried out a more elaborate market research programme than

any other described in this book. James Turbotte did his desk

research on the number of left-handed persons. He then set in train

a formal quantitative market canvass to find the number of potential

users of left-handed cues. Finally, he researched his method of dis-

tribution and decided to use Galligaskin and Breeks.

The examples of J S Brook (Example 6.1, page 103) and Bradfield

Techtonics (Example 6.2, page 109), the expanding businesses, have

half their problem solved in that, since they have been successful so

far, we can assume that the market is adequate. However, the reader

of a business plan must be convinced that the available market is

large enough to sustain the expanded business and that it is not

moving either to saturation or towards a new fashion.

J S Brook (Example 6.1) has two supports for his belief in the

Wagbatch Marina. He knows that in the previous year the demand Co py ri gh t © 2 01 1. K og an P ag e. A ll r ig ht s re se rv ed . Ma y no t be r ep ro du

ce d in a ny f or m wi th ou t pe rm is si on f ro m th e pu bl is he r, e xc ep t fa ir u se s pe rm it te d un de r U. S. o r

ap pl ic ab le c op yr ig ht l aw .

The Market 121

was greater than the supply because he had to turn away potential

customers, and he knows that the number of boats needing berths is

going up at present by 5 per cent each year. (According to the best

estimates available, the limit of canal capacity will not be reached

for a few years.)

As far as marketing is concerned, Bradfield Tectonics Ltd

(Example 6.2) is in a very special position. The need for expansion

and finance has arisen from a sudden increase in demand for the

product. The company will still have need of an active marketing

policy, but a shortage of sales is not likely to be the chief problem in

the foreseeable future.

George Weston’s company (Example 6.3, page 113) is what we can

call ‘market led’. George is a born market man and selling will not be

his problem. Indeed, his problems will arise because of his skill and

preoccupations with selling his product.

All the people in our examples, except possibly Marcus, the

inventor, had to be sure that there was a market. They knew that

unless they had enough customers there would be no profit for

them. They did not proceed on pure hope or a simple faith in the

value of their product or service; nor did they place much reliance

on the encouragement of their friends. The examples show the

means they employed to find out, as best they could, whether an

adequate market did, or did not, exist.

No one has ever gone bust through over-estimating the laziness

of his or her customers. I am not saying that most of your customers

are lazy or procrastinators. Many are conscientious, industrious

people; but they will not be upset if you make things as easy as

possible. However, you may quite well lose the business of lazy

people for the most trifling reason. Remember that it is not your

job to punish them for being lazy, and remember too that their

money is just as good as anyone else’s – if you can get it.

For instance, if you are dealing with the public or small busi-

nesses they are unlikely to be sitting in a well equipped and

organized office. The chore of answering a letter of yours or of

sending back an order form is often more than lazy people will do

briskly or promptly. You will make it easier for them and more likely

that they will give you the order if you send them a pre-addressed Co py ri gh t © 2 01 1. K og an P ag e. A ll r ig ht s re se rv ed . Ma y no t be r ep ro du

ce d in a ny f or m wi th ou t pe rm is si on f ro m th e pu bl is he r, e xc ep t fa ir u se s pe rm it te d un de r U. S. o r

ap pl ic ab le c op yr ig ht l aw .

How to Prepare a Business Plan122

envelope or, if you think it is worthwhile, a stamped preaddressed

envelope.

Make your order forms simple and easy to fill in. Indeed, if you

are canvassing an individual you know already, you could try filling

in some of the information before you send it (taking care to get your

facts right, such as the name and address of the individual). Above

all, avoid jargon.

Make sure your full address and postcode are on all types of

correspondence. Don’t make the customer have to hunt around for

your address, especially if it is a long one. This brings us to the

question of your telephone. Despite the development of modern

electronic means of communication, the 19th-century invention

of Alexander Graham Bell is still the public’s favourite method of

communication, especially for queries and complaints. Large com-

panies find the telephone an expensive form of communication,

and the very size of their organization turns their telephone network

into a cat’s cradle of complexity. Far too often this cat’s cradle is

used by the lower levels of a bureaucracy to bamboozle, delay and

complicate a difficult query in the hope that the customer will go

away and stop being a nuisance.

Small businesses are, or should be, immune to this problem.

One or at most three well-trained receptionists will solve the issue.

They will know who will deal with each type of query and where

such members of the firm are. Indeed, they may be quite capable

of dealing with some simple inquiries by themselves and will

become familiar with many clients. An intelligent receptionist, who

knows his or her way around your business, is discreet and with a

gentle voice, can do your firm immense good and should be treated

generously.

But the very small business, such as a joiner, an electrician and

the like, cannot afford a specialist receptionist. I hold that all small

business owners should carry a good mobile phone with them and

keep it always switched on so as to be able to answer it, however

busy they are.

May I suggest that your receptionist could well use any time he or

she has left in ringing up clients on a list prepared by yourself to see

whether and how your work satisfied them, and to ask whether they Co py ri gh t © 2 01 1. K og an P ag e. A ll r ig ht s re se rv ed . Ma y no t be r ep ro du

ce d in a ny f or m wi th ou t pe rm is si on f ro m th e pu bl is he r, e xc ep t fa ir u se s pe rm it te d un de r U. S. o r

ap pl ic ab le c op yr ig ht l aw .

The Market 123

have any queries. Such assiduity can only do good: ‘my supplier

cares about me’ is a feeling much to be encouraged.

As said above, no one has ever gone bust because he or she over- estimated the laziness of customers or clients, though many do so by under-estimating it. However, catering for the lethargy and procrastination of human beings has brought fortunes to many. I am going to give an account of one who got a flying start by making the most of this factor. Unlike my other stories, this is not in any way imaginary but is a true statement of something that really happened. Only the name and place have been changed – everything else is true.

Norbury Williams was a skilled mechanic with garden machinery. He quarrelled with his uncle who employed him and decided to try his luck on his own. Eventually he visited the local enterprise agency. His adviser there was already harassed by the difficulty of taking his own lawnmower to the repair shop in the boot of his car. He suggested that as Norbury had a low-loading trailer he should offer to go round and pick up the lawnmowers, thereby relieving his customers of the awkward chore of loading up their own machines into a car boot. He could even charge a bit more for offering this extra service.

The adviser suggested that Norbury have some cards printed with his new way of doing business and push them through the letterboxes of potential customers. The adviser suggested the area to canvass should be Rollsley, a well-known prosperous suburb where folk would be less likely to begrudge the higher price. Norbury, a bit of a psychologist, said Friday evening was the best time to take the cards round, as on Saturday morning the man of the house would already have lawn mowing and lawnmowers lurking in his mind. This was agreed, and Norbury said he would come back on Monday and report any progress.

But he didn’t. Nothing was heard of him all week. But the following Monday he came in to apologize, saying that he had been so busy carting lawnmowers around and dealing with them that he had had no time left. He had even been stopped by the police, who wanted to know what he was doing with a truck full of lawnmowers. Norbury explained. ‘Right,’ said the police officer ‘and when you have dealt with those, you can come and pick up mine.’

example 7.1: Norbury Williams

ce d in a ny f or m wi th ou t pe rm is si on f ro m th e pu bl is he r, e xc ep t fa ir u se s pe rm it te d un de r U. S. o r

ap pl ic ab le c op yr ig ht l aw .