Carrying out test trading prior to your Start Up Loan application will help inform your plans and forms a critical piece of market research.
In this short article, our Start Up Loans manager, Charlie Martin, explores what test trading is, and what you can hope to achieve. He also shares the dos and don’ts when it comes to test trading.
What is Test Trading
Many Start Up business owners will know that just because a business idea looks good on paper, it doesn’t mean that the idea will work. Test trading is a way for you to test your products or services on your target market. This will enable you to refine your idea, to ensure it meets the needs of its customers.
It’s important to remember this is not simply a box-ticking exercise, it plays an important role in informing your business plans and strategies.
Here are the 3 key areas that your test trading will support:
- That your product or service fits well within its marketplace
- That there is a demand for your product or service
- What your target customers are willing to pay for your product or service
When you are conducting your test trading, keep an open mind – if you really want your business to be successful, it needs to have mass appeal.
Test Trading – The Nuts and Bolts
Before you start test trading, you’ll need to pinpoint what it is you want to learn. Set yourself some objectives to make sure that your test trading is effective. You’ll want to use your results as evidence that your idea works.
Your objectives will greatly depend on what you want to learn. Make sure you figure out the purpose of your test trading, so that you can align your objectives.
Here are some things to consider when you are planning your test trading:
Time – Make sure you plan enough time to carry out your test trading, it’s a crucial part of your market research.
Sales Techniques – How will you sell your products? Will you trade on the street, could you rent a market stall? Will you need a license for this?
Location – Where will you carry out your test trading? Think about the locations and times of day that will help you to reach your target market. It’s a good idea to test trade at more than one location to gauge interest.
Costs – It’s likely that you may incur some expenses when conducting your test trading. Plan for this and keep a record of your expenses.
Volume – How many products do you need to test and at what price? You’ll want to prove that your prices are viable for your target market, and you’ll need to make sure you have enough products to generate results.
Operations – Consider the logistics. If you need to bring kit to your test trading site, how will you do so? If you need electricity, how can you supply it?
The Dos and the Don’ts Top Tips
- Don’t rush through this exercise, you’ll need to collect as much data as you can.
- Do take the time to create a realistic plan that you can implement within a defined timeframe.
- Don’t exclusively ask your friends and family – people who love us don’t always tell us the truth!
- Do identify potential customers from your target market, who will give you an unbiased opinion.
- Don’t go in blind!
- Do make sure you have set your goals and objectives.
- Don’t be put off by negative opinions, not everyone likes everything!
- Do take any feedback onboard. It’s not personal and it will help you to refine your idea and make it more appealing to a wider audience.
- Don’t take test trading lightly.
- Do understand that effective research at this stage will only help you make your business more successful.
To find out more about how to conduct market research for your start up, visit the Start Up Loans Marketing Hub.
SWIG Finance is the South West’s delivery partner for Start Up Loans. If you need funding to grow your new or early stage business, please visit our Start Up Loans webpage to find out more about how Start Up Loans could help you.
About SWIG Finance
SWIG Finance is a non-profit company that supports viable South West businesses that can’t secure sufficient funding from their bank. By empowering underserved SMEs to overcome their financial barriers, we are working to create a more balanced financial ecosystem.
We’re growing every year. In 2021/22, we lent £10.8m to 502 businesses, helping to create and secure over 1,000 jobs and generate £32.3m. For more information visit https://www.swigfinance.co.uk/social-impact-report-2022/
If you’d like an informal chat about your funding requirements, get in touch with our friendly and professional team to see how we can help: info@swigfinance.co.uk / 01872 227 932.