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How to conduct research for a new business

There’s a lot to think about when planning to launch a new business. And that’s why it’s vital to conduct research. This article will look at some of the key insights you’ll need to gather for your business plan and also to figure out whether your business idea is viable. 

Why do I need to conduct research?

Record numbers are starting their own business. Last year, according to the Centre for Entrepreneurs, 772,002 new businesses were started in the UK, which is a 13.25% increase on 2019’s total.

Success is not a given, of course. It is believed that about a fifth of all new businesses fail in their first year, with most running out of cash, leaving them unable to cover their costs and continue to trade. About a third of all new businesses fail within two years, with only 30% lasting 10 years.

In many cases, some or better research before starting the business may have prevented many first-year business fatalities. Conducting sound research in the right areas can enable you to make better choices, so you to get off to a better start and make it past your first year and beyond.

So, if you’re starting your own business, what should research in advance and what information do you need to find out?

Conducting competitor research

This is essential and once again, simple, no-cost online research can reveal much valuable information. In the case of retail, you could pose as a customer and visit a competitor’s premises to find out more. Also visit competitor websites.

You need to know who you’re up against, how long they’ve been going, where they are, how they market themselves and sell, and on what terms. Crucially, of course, you need to research their prices, so you can work out whether you can afford to compete or even beat their prices.

Here are some questions you’ll need to consider…

Researching different suppliers

Also take enough time to research potential suppliers.

  • Who and where are they, what products and services do they offer and – how much do they charge?
  • Will they give you credit?
  • Can you get discounts?
  • How do they maximise their value to their customers?
  • What do their customers think of them?

These are all key questions. Finding suppliers that offer you best value and consistently good customer service can make a huge difference – it’s not just about finding the cheapest prices.

What about tax?

You may or may not need to pay for an accountant’s services all year round, but their expert advice about tax matters could save you a lot of money. They can tell you the most tax-efficient way to register your business and what expenses you can claim for. They can help you with VAT if necessary and administer your PAYE scheme if you need staff. They can advise you on accounting software, managing your finances and cash flow, which is to key to your survival and success.

Accountants (and independent financial advisers) can also advise you about your personal finances and pension. Also research accountants before starting your business. Seek recommendations from other small businesses, so you find an accountant with the experience and service-level you need.

What about launch and operating costs?

You may or may not need to sort out commercial premises and pay rent or business rates. You could need to buy a vehicle, equipment, tools, stock or materials, or sort out insurance, staff uniforms or packaging. You need to create your brand, organise your website and possibly get stationery printed.

Although minimising your outgoings by only buying things you need is a must, starting a business inevitably involves cost. Carefully consider everything you need to buy to launch your business and keep it running until it becomes profitable. Accurately work out how much you’ll need to spend – these are your start-up costs.

Also work out how much money you’ll need to run your business week to week – including your earnings. These are your operating costs, which will tell you how much you need to sell each week or month to stay afloat.

Startup costs calculator

We've put together some of the typical things you'll need to invest in when starting a business. Fill in the costs below to find out how much money you'll need to get up and running.

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Is my business viable?

Obviously you’ll need to recoup your start-up costs, too, but comparing your monthly operating costs against your likely monthly revenue (your market research should allow you to forecast sales) will enable you to see whether your business idea is viable.

If your outgoings (costs) are higher than your revenue (sales or earnings), your business idea is a non-starter. You need to cut your costs or increase your revenue (make more sales). If you can’t do either, starting your business will only end in failure.

Alternatively, informed by your research, a basic calculation could suggest (on paper at least) that your sales are likely to be higher than your costs, so, you can start your business with a measure of confidence. And another benefit to all of the research you’ve done is that you now have much of the information that you need to create your start-up business plan.    

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