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leehellcat
25-01-2003, 02:47 PM
Okay, SO I've written my business plan, and thought to myself what is my realistic available market ?
I have search around a bit and found that there are 66,200 businesses trading in my county, and I am aiming to Provide IT Solutions to SME's.
According to the figures that I have found 99% of businesses in the UK are SME's.
Now to me 1% of the entire market is not a particularly large percentage to be going for, it seemed reasonable until I thought a bit more about it, and then I thought, okay 1% is small but that is 662 customers.(these being repeat customers). That again didn't seem like too many for a 3 or even 5 year business plan.

Wait for it, here comes the spanner in the works......

..... I have been in contact with one of my potential competitors, they are fairly small and have been going for about 4 years. There are 5 of them in total, and they turn over about 120K a year, and so far haven't posted a profit in there P/L. This concerned me, because I had thought that they were doing quite well.

Is 1% of a local market too high an expectation ?

The only differentiatior between me and my competitors is going to be price. The average day rate in my area is 600, and I plan to charge just under half that (250-300). Am I barking up th wrong tree ??

Help Please !!!

KevinL
27-01-2003, 12:34 PM
1% is too low, especially if there are only 5 competitors.

Imagine that of the 66,200 SME's in your county, 50% may be part of a larger group so already have existing contracts that you will not break in to so you are left with 33,100. Now I would say you should be aiming for at least 5% of that market or 1,655 businesses.

On another point, if your competitors can't make a profit charging on average 600 per day, how do you think you can make a profit charging half that? I think that either they have far too many or too high overheads or your costs are not realistic.

There are so many people who think they can undercut the competition by charging half of what their competitors do but very very few succeed and if they do it is often by offering less of a service than their competitors did. But customers may be happy with less, look at the success of Easy... Easyjet, Easycar, etc.
Just be cautious as people charge the rates they charge for a reason, either because they have a monopoly or because that's the market rate for the level of service they offer and that's what they need to charge to break even or make a profit.

Good luck.

leehellcat
27-01-2003, 02:20 PM
I think that it is fair to say that the others charge what they do because it is the 'market rate'. I find it hard to believe that they all have the same costs, which would be the other contributing factor to them all charging the same amount.

The way that my costs will be lower than theirs is that I will not have an office, I will be home based.

I do not see the need for an office when you only earn money from being on site with a customer.
I also know that the competitor that doesn't make any money carries some dead wood. ie 2 directors who do not bring any money into the company.

Cheers for the advice though.
Are you coming to the next meeting in february ? It'd be good to discuss it further. What market are you in, and what do you do ?

KevinL
28-01-2003, 10:37 AM
I won't be attending any meetings in London as I'm in the North West and unfortunately not at weekends either due to me having a very young family and I'm not in the situation of everyone else, I'm employed and don't want to start my own business. I am starting a new department within the firm I am at though so I am experiencing many problems first hand that others are going through, e.g. marketing, website design and content.

I am firstly a Chartered Accountant but have specialised within accountancy and am now a Corporate Financier (professional adviser) and I deal with Mergers, Acquisitions, Disposals, MBO's, Fundrasing, Business Plans, etc.
I post comments on this site to help people with no knowledge of business or finance as there are many people with good ideas (but some people unfortunately just don't have good ideas) which would be beneficial to everyone to develop. I receive no benefit from this other than I hope people remember me and hope that when they need professional advice in the future they try me. I have had e-mails from users of this forum but unfortunately for many people at the moment the funds they are looking for are too small to justify the fees we charge because we typically work with owner managed businesses with deal values of 100,000 upwards.

So that's me and I wish you every success in completing your plan and raising the necessary finance.

Kevin Lucas
www.ratcliffeco.com (http://www.ratcliffeco.com)

leehellcat
28-01-2003, 11:50 AM
Kevin,

THanks for your assistance, it is greatly appreciated, as I am definately new to this. I will keep your contact details on file, as you never know when they may come in useful.

Hope your new department get up and running without too many problems.

Regards

Lee

DavidHa
29-01-2003, 03:07 PM
Lee,

I've worked in the IT channel for over 9 years from a technical, sales and now marketing angle.

I have friends and colleagues who have set up their own businesses, one of which turned over 4.7m in their second year with a staff of 11. They did this because they understood the needs and circumstances of their target market and tailored their value proposition to support this.

The probem with IT is that a lot of SME's are still trying to recover the costs of the dot.com and Y2k debacles and are therefore looking to minimize additional cap ex on hardware and maximize the utilization of existing assets.

I find the most successful businesses selling to SME's are those who offer to take control of their existing infrastructure, provide support and life cycle management whilst introducing new technology that will deliver immediate benefit to the business where it needs it most.

Do you have a particular sector or horizontal focus (i.e. public sector, CRM implementations)?

Stay Great.


David

leehellcat
31-01-2003, 09:52 PM
I don't plan to target a particular sector, rather have a wider veiw. It may make sense to find a niche once I have got on my feet, but I figure turning a profit is the most important goal to start with.