Selling: the basics

There are a number of things you need to consider before you start selling your product or service.

Market share

Market share is the percentage of all sales within a market that is held by one brand/product or company and can be measured in several ways, such as:

• sales revenue
• sales volume

You can increase market share by:

• providing more value for potential customers - eg improving product quality
• price cutting
• adding new distribution channels or increasing the intensity of established channels
• promotion - spending more on advertising

Niches

A niche is a small section of a market that is suitable for a specific range of goods or services that meet a particular need. You can create a niche market by identifying customer needs or wants that are not being addressed by competitors and by offering products to those customers

Marketing strategy

Your business will need a well-developed marketing strategy - this will form part of your overall business plan. For more information, see our guide on writing a marketing plan.

Brand message

Before you begin to sell a product or service, you need to think about what your brand stands for. For more information, see our guide on branding: the basics.

Sale channels

You need to consider which sales channels will work best for your business, ie using face-to-face sales, distance selling, wholesalers or sales agents. For more information, see our guide on sales channels: your options.

You will need to promote your product or service to encourage sales. Examples include:

• incentives such as bonus points, vouchers, money-off coupons, competitions and prize draws
• promotional messages via new media including websites and mobile phones
• point-of-sale materials and product demonstrations
• free gifts/samples
• discounted prices
• joint promotions
• fair-trade and cause-related products such as those which help charities
• finance deals - no or low finance, or buy now pay later

You can also use social media to encourage sales, for example, by running a competition or a discount for a limited time. It is also a way of connecting with and gaining customers' feedback. Read our guide on using social media.

Pricing

There are many ways to price a product, for example:

• premium pricing - a high price for unique products or services
• penetration pricing - an artificially low price to gain market share before the price is increased
• economy pricing - no-frills low price usually associated with economy brands
• promotional pricing

Field marketing

Field marketing involves getting trained people to conduct research about a specific product or service.

Benefits of field marketing include:

• face-to-face contact with potential customers
• marketing campaigns can reach niche markets quickly and effectively
• field marketing can be supported with other marketing techniques in-store and online
• brand building - trade shows and events reinforce brand awareness

Merchandising

Merchandising is about how you present your products to potential customers.

You need to understand your potential customer and create:

• attractive products/services/logo/store front/signs
• comfortable space to shop or do business in - welcoming, clean interior with good product presentation

If you have a business idea that you would like to launch quickly, you may want to consider licensing your idea to an established company.

Before you find any licensing partners you should make sure your idea is proprietary - made, offered, or sold only under the exclusive rights of a manufacturer or seller. You should also research potential partners and industry standards.

You should seek legal advice and use a non-disclosure agreement to protect your interests. You should also obtain some form of intellectual property protection for your idea.

Proving your product

You will need to convince a company to pay you a royalty on the wholesale of your product/service.

You can do this by creating a prototype or concept drawing of your product. You could also create a sell sheet of your idea that details your fresh approach, new strategy or whatever differentiates your product from those that already exist.

Test the market

You should test your product or service to help you decide whether or not to continue with it before doing a full launch.

A sales contract is an agreement that defines the rights and obligations of both the seller and buyer.

If a customer pays for an item when they buy it, they automatically accept the terms of the sale at the point of purchase. You can display your policies, terms and conditions and warranties on invoices, bills, your website or in your shop.

A sales contract comes into existence when an offer is made and accepted. Unless your terms of trade have been agreed before this, they do not apply. However, anything salespeople have promised is likely to become legally binding if the customer is relying on it, even if it is not in writing.

Unfair trading and consumer protection regulations

You can comply with most sales regulations in one simple step: by avoiding unfair trading and misleading marketing.

Under the Sale of Goods Act, any products you sell must at least:

• match their description
• be of satisfactory quality and suitable for their purpose

There are similar requirements that apply to the sales of services.

Other key selling laws

If you sell via the internet, by mail order or telephone, the distance selling regulations will apply. These regulations give consumers some rights to cancel purchases. For more information, see our guide on selling online: the basics.

You should seek legal advice to understand any other regulations that may apply to your particular products or services, eg offering consumer credit and data protection.

You will also need to be aware of any sales contract that you must sign when dealing with suppliers or wholesalers.

Drawing up a sales contract

Your sales contract should reflect particular aspects of your business and have clear terms and conditions, such as:

• who the contract is between and what is being bought and sold
• price and payment terms
• details of any warranties and any buyer or seller obligations

A sales forecast is a month-by-month prediction of the level of sales you expect to achieve. Most businesses draw up a sales forecast once a year.

You can ask yourself some questions to help you forecast sales:

• How many new customers do you gain each year?
• How many customers do you lose each year?
• What is the average level of sales you make to each customer?
• Are there particular months where you gain or lose more customers than usual?

Every year is different, so you need to consider any changing circumstances that could significantly affect your sales. These factors - known as the sales forecast assumptions - form the basis of your forecast.

Typical assumptions include:

• the market - will your market or market share grow or shrink?
• your resources - ie will you be changing the number of staff you employ or the amount you spend on advertising?
• overcoming barriers to sale - ie can improve your sales by changing location or prices?
• your products - are you planning to launch any new products?

For new businesses, the assumptions need to be based on market research and good judgement.

There is a wide range of sales forecasting that you can use. This software generates forecasts based on historical data. If you are considering buying software, get advice from an IT expert, your trade association, your business advisers or businesses of a similar size and in similar markets.

Common forecasting pitfalls include:

• being too optimistic - new businesses should avoid working out the level of sales they need for the business to be viable, then putting this figure in as the forecast
• not making your forecast achievable
• ignoring your own sales assumptions
• moving goalposts - make sure your forecast is finalised and agreed within a set timescale
• not getting feedback - get an accountant or salesperson to review the document

Once you have finalised your sales forecast, you can create a sales plan. The questions your sales plan should answer include:

• What are you going to focus on?
• What are you going to change?
• What steps are involved?
• What territories and targets are you going to give each salesperson or team?

The sales plan will start with some strategic objectives. Here are some examples:

• break into the local authority market by adapting your product for this market
• open a shop in an area that you believe has the potential for generating lots of sales
• boost the average sale per customer

You can then explain the stepping stones that will allow you to achieve these objectives. Use objectives which are SMART - Specific, Measurable, Achievable, Realistic, Time-bound.

Using the example of breaking into the local authority market, your stepping stones might be to:

• hire a sales person with experience of the local authority market on a basic salary of £24,000 by the beginning of February
• fully train the sales person by mid April
• ensure that any changes the product development team has agreed to make are ready to pilot by the beginning of April

As well as planning for new products and new markets, explain how you propose to improve sales and profit margins for your existing products and markets.

Identify how you could remove barriers to sales by:

• Increasing the activity levels of the sales team - more telephone calls per day, or more customer visits per week?
• Increasing the conversion rate of calls into sales - through better sales training, better sales support materials or improved sales incentives?

Read our guide Sales channels: your options.