Knowledge is power

A good business idea is one thing, but having a customer to buy it is everything, writes Russell Emmerson

IF YOU are moving to Moonah in Hobart, you may wonder which of the two dental practices will help you with that nagging pain.

If you are a dentist looking to set up shop, you are more likely to be interested in the fact that 4124 people haven’t been to a dentist in more than a year and the rest (7340) spent $3.1 million on dental services last year.

You might also want to know their age and gender – just to make sure your marketing is hitting the right target.

And the beauty of this is that it is public information.

KPMG demographer Bernard Salt says small businesses too often overlook doing basic research when it comes to market development.

‘‘ They don’t want to see the end of their dream and therefore they look for evidence to validate their presumptions,’’ he says.

But that information is key to success today and your future investment, says Greg Thompson, a 25-year veteran of the advertising and marketing industry.

‘‘ Knowledge is absolute power when it comes to business success,’’ he says.

‘‘ If you manage a small business or are thinking about buying a small business or franchise, the key thing you need to know is the size of your market and your competitors.

‘‘ You need to know how much room you have for growth and to know from where that growth will come.’’

The basic information is freely available.

Census information is freely available from the Australian Bureau of Statistics with data guides to assist your journey (targeted searches cost) and local governments usually offer city council-based statistics on its residents.

Business Enterprise Centres will often host local data or be able to direct you to the next step, and industry associations and IBIS World have access to industry-specific data.

If you have hundreds of products in your range, it may be easy to be overwhelmed, but Naked Business Consulting managing director John Varvarigos says businesses need to keep it simple.

‘‘ Small business doesn’t have the time or money to undertake extensive research in the way corporate businesses do,’’ he says.

‘‘ In my opinion the 80:20 rule applies; focus the limited time you have on the big-ticket items and don’t sweat the peripheral 20 per cent.

‘‘ The key is to know which are the big issues and which the peripheral ones.’’

Through his company Comintel, Thompson has developed a map-based tool that gathers public information about spending, ailments and vehicle registrations right down to the smallest statistical division of 250 homes.

This information has been used by a financial planner to hone letterbox drops to those most likely to have a self- managed superannuation fund and a mortgage broker to find homeowners with low mortgages to discuss increasing their mortgage.

Varvarigos says businesses need to first ask themselves whether their customers will switch products – do a costbenefit analysis – but then look to the downside risk.

‘‘ We strongly believe that if you look after your downside risk, the upside opportunity will take care of itself.

So we focus on two key questions: What would be the cost if you didn’t sell any products and can you bear that, and what is your break-even volume and how easyily can you achieve it?’’

Look for the key risks in generating sales and test those risks individually to focus on what really matters, he says.

‘‘ Businesses need to embrace the fact that they can fail, and, in fact, probably will fail.

‘‘ While this approach might seem risky, this is an area that small business has a huge advantage over large or corporate businesses . . . because the level of brand damage caused to a small business can be managed quickly, while the brand damage to a corporate can mean that a CEO’s head will be on the chopping block.’’