Author: Jean Richard Franck, M.A
You want to start a new business?
There is a myriad of factors to consider, a great number of things to be done; but one particularly important thing (that shouldn’t be overlooked) is an adequate financial analysis.
You need to be able to answer questions such as this:
– Do I have a working knowledge of the market I’m venturing into?
– How familiar am I with the market?
– What are the specific features of customers of my niche?
– How do I achieve the best results?
The aim of your business, if profit-oriented, is to make as much money as possible, and without adding unnecessary pressure to your workload.
Here are some of the critical things you have to consider when preparing the financial analysis of a new business.
1-Consider the type of business and the market you are targeting
With the type of business, you’d like to venture into in mind, consider the niche that would be of most value to that business. Specificity is of key importance here; once clients are comfortable with you providing a certain service, they’d trust you to keep on doing same.
First thing first, it is important that you find the niche that would be good for the market. You should pay attention to different types of businesses available in the market and select the one that is unique so that you can provide your customers with something unique.
You must be sure that any new business, product or service being introduced is of immense benefit to your clients, and not just a waste of their hard-earned funds, and their time! (Rieva, 2017).
2-Understand the requirements of buyers
Once you have selected the business, the next thing to consider is the requirements of your targeted customers.
• Conduct a complete analysis to know what challenges your buyers face.
• Develop a product that will resolve their issues efficiently
• Show your buyers how useful your products are.
Never forget: your buyers are your biggest assets; and the only way to grab their attention is to show them that you understand their issues and that you are ready to help them out.
3-Evaluate the market and plan accordingly
You should start with the evaluation of your market. You have to pay attention towards the local market first to understand the methods of old companies and understand their business strategies. It will give you a perfect idea regarding the marketing tactics you will be using to make your business stand out (Rieva (2017).
The development of an accurate business plan is very crucial for your business to thrive, and this cannot be done without a complete market analysis. You should take help from experts during the market analysis. They will help you in the study of online market as well.
4-Know your competitors and the challenges you are likely to face
No business takes off and maintain a high momentum without having adequate knowledge of the competition, and what they can do to distinguish themselves from others who might be providing the same or similar services or selling similar products.
You need a comprehensive idea of your competitors and their various strategies.
Conduct complete research on the products they have for the customers and marketing strategies they are using.
It will help you to know the different marketing challenges that you will be facing in the future (Alyssa (2016). Once you get to understand the line of products of your competitors, you have to assure that you develop at least one product that will be different from your rivals. It will help you to attract most of your customers.
5-Know the startup budget and how to minimize start up deficits
Don’t spend lavishly. Remember that you have limited funds for the startup, so cut your expenses accordingly.
You should have enough savings to assure that you can manage the development of your products as well as the payment of your employees because that is the yardstick to determine your business growth. To protect your business from any budget deficits, you should create a financial plan. It will help you to manage everything effectively.
6-What are the legal issues to get licensed
Starting a business would require you to get a license.
Recently, due to increase in the online business organizations,the government has laid down rules for even online companies to get a license. This permit will depend on the services that you are planning to provide. You should get all the legal information from the court so that you will not make any mistake in the process of application. Ensure to submit all the legal documents so that you can get your license issued in limited time. Remember that there will be a specified expiry date of the permit and you will have to renew it before it comes. (Elizabeth (2017)
7-What’s the average income of the customer you will be targeting
Take it easy…I know you have lofty plans, but have you considered the target income of would be patrons?
• If you are aiming at the elite market, there is nothing to worry about because they will easily manage the cost
• For the middle-class customers, you will have to manage the rates according to their income so they can afford your products. (Alyssa (2016)
• If your items are for the low-class customers, you should understand how hard it is for them to make money. Ensure that your services will not make them feel like they have wasted their money.
8-Develop a pricing strategy
The pricing strategy you choose should be one that grabs the attention of maximum customers, so your revenue will increase in limited time.
Some of the common approaches you can consider are:
• Premium pricing
• Penetration pricing
• Price Skimming
• Economy pricing
• Psychological pricing (Leigh (2016)
You have to put into consideration all the tips mentioned above before you select the pricing strategy for your company. Pay particular attention to the average income of your customers so you can get best results.
9-Is the market saturated?
An important thing you should consider is whether the market is saturated or not.
Saturation is good for you, because only then it will be easy for you to merge into the market and show that you have been doing business for a long time.
You have to ensure that your customers trust your services. However, excessive market saturation might not be good for you because it will increase the competition and customers will have more organizations to select. (Leigh (2016)
10-How to invest with minimal risk?
There might be some risky situations for you to deal with. When you are starting a business, it might not be a good idea to invest in such conditions. Be sure that you invest in the products and services that come with minimal risk.
That is the only way you can progress. You are already taking a chance by starting a new business, so avoid taking a risk with your products too. (Elizabeth (2017)
It is crucial that you conduct a complete analysis of the market. You might not be able to understand everything, therefore; it is advised that you take some help from your mentor. Once you have developed the business plan, get it checked by a professional for advice and corrections.
In all, excellent financial analysis can make the difference between a kickass startup and a startup that’s barely functional!
Leigh (2016) Different Types of Pricing Strategy
Rieva (2017)How to Create Financial Projections for Your Startup
Elizabeth (2017) How to Write the Financial Section of a Business Plan
Alyssa (2016) How to write a financial analysis
Author: Jean Richard Franck, M.A
Published author of “A Complete Innovative Plan of Action for the Strategic Manager”