Knowing your market and competition is crucial when starting up

Everybody always says that knowing your market is everything. Saying it is one thing, but understanding why it is so important will help you stay ahead of the pack.

Your market includes your customers, your suppliers and your competitors – to name a few. But these three are pivotal characters that define the success of your business.

Obviously, your customers are the ones buying from your business. Getting to know what they like, how much they will spend, what they enjoy and what they need will give you a better understanding of what they will want from you, enabling you to translate your product into something that will sell to your target market.

Throughout your journey developing your business and product or service, make sure you ask your customer what they think at every stage. You should be led by what they will buy, not by what you think they will want without proving to yourself that your basic assumptions are right.

A good place to start to evaluate your customer is by looking at your competitors. What are other people out there doing that is similar to your business? What are they doing well? What do your customers like and dislike about the competition? This will give you the insight needed into how to make your product or service even better on price and quality.

I was talking to some of our latest entrepreneurs who have begun their business with Start-Up Loans. Luke and Sam, the founders of Thousand Yard Films, are in the early stages of their business. They really focused on getting to know their market. When I asked them about what they did before their launch, they demonstrated the value of market knowledge.

"We started by looking at the industry generally and found there was a gap in the market. We spent a lot of time researching the market, to understand what others were doing and where we could create value."

Both entrepreneurs took their time at the start to properly research what their customers wanted, what their competition was doing and where they could create a niche for themselves. They are acting as disruptors in their sector, forcing change to create clear water between themselves and the rest of the pack. From their research, they found two main possible competitors and quickly realised that they could not only compete in the same space, but also do a better job.

There are quite simple ways to get to know your market. I encourage my businesses and entrepreneurs to use social media and online tools as much as possible because they are generally free, quick and easy to use.

For example, at Start-Up Loans, we used Facebook to promote a poll we were doing to see what our entrepreneurs thought about the value of Europe to their businesses. We set our limit, and got over 500 responses on our Facebook page. It was a great way to get to know our community and something I'd definitely recommend.

I would encourage you however, not to only look into your market when you're starting up. There are businesses starting every day – we start 40 a day ourselves. So there's always new competition and innovation within existing competitors all the time. Keep your eye on what's going on, and how your customers needs are changing. To stay ahead, you need to ensure you know everything that is going on in your market– and not after you've been overtaken.

James Caan is chairman of the Start-Up Loans Company

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