The core data needs to come from researching you market and competitors, and fully understanding your existing and potential clients. Your business idea, business shape, and the first steps that you take will all be based around a product or service that you believe can become a viable business and have a long-term future. But who exactly will you sell to? At what price? Does the market actually want what you are trying to sell? The better able you are to answer these questions, and many more, the more chance your early-stage business has and the easier it will be to scale.
In simple terms, the clearer your understanding of your market and the demographics of your customer base the easier it will be to refine both your offering and any marketing that you will be doing. But as a small company, often with limited financial resources, how can you best go about gathering data? Some of the most tried and tested methods include the following: gather information electronically or at point of sale; establish focus groups of existing and potential clients to discuss both existing and new products; contact some of your more important customers directly by phone or email; ask clients to complete a short survey; and so many others.
Having taken the trouble to gather data what are you going to do with it? There is no point in collecting data unless it is properly analysed and then used to your advantage. Many founders of early-stage businesses are guilty of trying to sell what they ‘think’ or ‘believe’ that buyers want, but having obtained data it is possible to refine your existing and future ideas and products to make sure that they do indeed match what buyers are actually looking for.
The data gathered should be used not just in your product but also in your marketing. Most early-stage businesses have limited marketing budgets and making sure that any marketing is aimed at the most receptive audience will ensure a better return on investment or ‘bang for your buck’.
Don’t forget that whilst data gives you great insight and power into understanding your customers, and makes you better able to sell the right product to your core target audience, it also enables you better identify where and how you might extend your business into other areas or demographics that you are not selling to at present. But any data needs to be handled with care so do make sure that your business is properly registered for GDPR. Also, cybersecurity is a very real threat, even for very small businesses, so take the threat seriously by taking precautions and do not leave it to chance.
Once the data and all the other research has been collected and analysed it can then also be used to form the assumptions and the financial forecasts that your whole business plan and future predictions are based upon. Put simply, without the data and the knowledge, the assumptions will be wrong and so then the forecasts will also be wrong. This can often lead to disastrous consequences as the business will not perform as expected.
It can very clearly be seen that any data and any financials are anything but just being a number as they form the foundations of everything that is needed to start a business in the first instance. In addition, do not lose sight of the fact that gathering data and altering assumptions and forecasts should be an ongoing exercise in order to reflect changing market circumstances and indeed those within your own business.
So, the next time you see something that says ‘data and financials’ please do not look away, but instead think of it as so much more than just numbers.
This series of articles follows themes explored in more detail in my new book, Start-up to Scale-up : what funders expect at each stage Go to the link to pre-order your copy and use the discount code 10off-start-to-scale to get a 10% discount.
19th October 2021
in British English