This calls for an analysis of two potential factors:
1) The past growth of the company within the market of which it is a part.
(2) A forecast of the future sales pattern.
You should take into consideration the fact that the seller will also need a market analysis (or marketing plan as most people calls it) for the business that he proposes to sell to you. He wants the best possible price for the business and the better the outlook, the more likely you are to agree to the asking price (without it necessarily being you who pays for it). It is to your advantage that you understand the market so you’ll have a great advantage over the seller. The more you know about the market, the better you can determine the true value of the business.
You need to do the work. It will vary depending on what industry you are interested in. However, detailed market research will be required on your part.
You must understand that purchasing a business is not an overnight deal. You need to think about it and make sure that this business responds specifically to your interest.
If you are among those who are interested in flipping businesses, then this advice does not apply to you.
Question: Will a single market analysis make me understand more about what business to purchase?
Answer: Two different perspectives are present here. The seller has access to data about the business that you don’t have any access to. Unless you have had wide and recent experience in the same kind of business, you may rightly or wrongly tend to rely on the seller’s statement of the market position of the company.
No two studies of the same company will produce exactly the same results. Your analysis is
almost certain to be on the conservative side, and a compromise will be necessary between you and the seller.
Another question is whether you and the seller should conduct your own market studies or hire
specialists to do it. The detailed and complex type of investigation conducted by a professional market analyst is valuable, of course, but the cost is considerable. The basic purpose of a market analysis in the buy-sell situation is to get a clearer picture of the company in the marketing scheme and some indication of the general direction in which it is moving. You should be able to gather and analyze the basic data you need for this specific purpose.
Question: What about fierce competition? Should it have affect my decision regarding purchasing the business?
Answer: Competition is always good and healthy. It keeps your creative mind active. By purchasing a new business, you don’t only acquire the physical property of the company; you also inherit its competition. You’ll probably be able to do little or nothing to lessen the competitive pressure operating against the business, but you can develop a clear working knowledge of its state of competition, the relative strength of the business within the market, the general patterns of development, and change. A detailed analysis of the competition is highly recommended in deciding whether to buy an existing business.
Attention should be given first to competitors of about the same type and size as the business in
question, since they are on a more realistic level of competition. A small clothing store would be wise to concern itself with other small clothing stores rather than with a high-volume department store. In time, a small operation might grow to the point of competing successfully with major firms, but the immediate pull of competition will come from other businesses of about the same size and description.
Investigation of large businesses, if any is made, should focus upon the extent to which they enlarge the total market, stimulate demand, or otherwise open market possibilities to smaller businesses.
Question: How can I differentiate myself from my competitors? What should I offer to prevail over them?
Answer: This is “branding” for creative people.
To do that, there are three things you need to understand:
1) The brand’s personality:
2) The relationship the brand has with the audience:
3) Visual icons, symbols or other representations of the brand such as the logo or a character.
So the three steps to building a brand are:
1) Create a character or personality for the company,
the product or service. Just as you would for a real
person, based on that brand-person’s reputation, their attitudes and behavior.
2) Build a relationship with your target market based on that personality. Do this over time, using advertising in addition to all other communications, including the way employees are trained to interact with customers.
3) Reinforce the relationship and trigger recognition
with consistent visual symbols. These symbols can
include everything from a color scheme and logo to an imaginary character, or even the president of the company.
Question: Can you give me some example of brands out there?
Answer: Definitely. Think of some existing brands, consider Sony or the famous McDonald’s,
Coca Cola or Pepsi. Now think of those brands, or one of their products, as a person. Pause a minute and think about the way you really regard them and how they make you feel. Go beyond generalizations like, “young, exciting, professional”. Create for yourself a brand that will characterize the product you offer. Open your eyes to what is around you. Creativity comes around with new or existing ideas. Potential customers will remember you by it. Obviously some brands you recognize, but don’t really know. And some brands, like some people, are a part of your daily life. Those are the brands you know very well. And by owning or using them, well, it says something about you. There are probably other brands you would like to bring into your life. Brands you aspire to possess. because they would say something about who you are by virtue of association. “Hey, check out my Porsche. Yes, I’m making a six digit income.” The artistry in all of the above lies in creating a brand that has a relationship with consumers, one that fulfills
a genuine psychological need, one that is meaningful in human terms. Get the idea? Then let’s get down to business.
Question: How can I create a brand? Is it a difficult process?
Answer: It can be a lengthy process. Patience is a must. Time is required for people or clients to get used to and trust your products. For some clients you will need to create a brand personality for the company, and one for each individual product or service. So for a large company with multiple services, you’ll create an entire family, with distinctive personalities for each. So to start, pick a product or service or company, then define a brand personality. Next, describe your brand in one short paragraph as you would a person. Now that you have a clear definition of the brand’s personality, bring it to life in your ads:
1) In the way you write, which should express the brand’s personality, not the writer’s.
2) In the appearance of your ads, which should be formal or friendly or whatever is appropriate to the brand’s personality.
3) And remember that a brand should differentiate the product from competitive offerings. Make it distinctive.
Next, describe the relationship between the brand as a person and the target market.
All these methods will help you to differentiate your product in the market and to select the right business in the right industry.