“We often overestimate the market size, and in many cases there may not be one at all,” says Robert Hisrich, director of the Walker Center for Global Entrepreneurship at the Thunderbird School of Global Management in Glendale, Ariz.
Here are 10 questions that can help you determine whether you have a target market and what it is:
1. Who would pay for my product or service?
First, try to understand the problem that your product or service can solve, says Greg Habstritt, founder of SimpleWealth.com, a Canada-based advice website for small-business owners. Then, use that information to help determine who would be willing to pay for a solution.
“Not only do [your potential customers] need to have the problem, but they need to be aware they have the problem,” Habstritt says. He recommends using Google’s keyword tool to see how many people are searching for words related to your business idea.
2. Who has already bought from me?
To refine both your target marketing and your pricing strategy, see who has already bought your product or service, says Amos Adler, president of Memotext, a medication compliance app maker in Maryland. You can gain valuable insights by releasing the product in a test phase and letting potential consumers speak with their wallets.
3. Am I overestimating my reach?
It’s easy to assume that most people will need your service or product. But rather than make assumptions, reach out to groups of potential customers to get a more realistic picture of your audience and narrow your marketing efforts.
You can conduct surveys, do man-on-the-street type interviews in stores, or organise small focus groups. “We get so passionate about the idea and how good it is that we overestimate the market size,” Hisrich says.
4. What does my network think?
As you try to understand your target market, it may be challenging – and expensive – to seek feedback from potential consumers through surveys, focus groups and other means. But you can tap into your social networks to get free feedback.
Many people in your extended network will likely be willing to take the time to give you opinions and advice, says Bryan Darr, founder of Mosaik Solutions, a data analytics company in Memphis, Tennessee.
5. Am I making assumptions based on my personal knowledge and experience?
Your own personal experience and knowledge can make you believe that you understand your target market even before you conduct any research, Habstritt says. For example, if you’re a fitness buff and want to start a business related to personal health, you may assume you know your customer.
“Don’t assume that you can think like your target market,” Habstritt says. “You have to ask them and talk to them to really understand them.”
6. What’s my revenue model?
Figuring out how you’ll reap revenue can help you find your target market, Hisrich says. Social ventures can be particularly tricky, he says, because without a specific plan for getting revenue it’s easy to overestimate the size of the customer base. But if you’re revenue model is simply selling a product online, it can be easier to figure out a target customer.
7. How will I sell my product or service?
Your retailing strategy can help determine your target market, Hisrich says. Will you have a store, a website or both? Will you be marketing only in your home country or globally? For example, an online-only business may have a younger customer than one with stores.
A brick-and-mortar business may narrow your target market to people in the neighbourhood.
8. How did my competitors get started?
Evaluating the competition’s marketing strategy can help you define your own target customer, says Darr. But of course, don’t simply copy the marketing approach of your biggest competitors once you define your target consumers. “You must have a way of differentiating what you are doing from what the other guys offer,” he says.
9. How will I find my customers?
As you start defining your target customers, try to determine whether you can efficiently market to them. You’ll need to do some market research and study your target audience’s demographic, geographic and purchasing patterns.
If you’re selling from a storefront, you need to know how many people in your target market live nearby. If you’re selling from a website, you need to learn about your prospective customers’ online behaviour. Understanding how to locate your customers early on can help you establish a game plan once you start building a marketing strategy, Hisrich says.
10. Is there room to expand my target market?
Be prepared to redefine your target market or to expand it over time, Darr says. For example, figuring out whether you’re targeting a domestic consumer or customers throughout the world can be a good start. As the power of mobile mapping has grown in the last decade, he’s seen the number of target markets grow at his own firm.
In the beginning, Mosaik dealt mostly with wireless operators, but now he also counts cable providers and broadcasters as clients, Darr says.
Put On Your Wellies: It’s Time To Wade Into Risk
Entrepreneurs aren’t all leaping into the unknown like lemmings off a cliff, but they do need to consider it…
You’ve had a great idea. You’ve looked into its development. You’ve recognised that it has potential beyond just what Auntie Mabel and Mike From The Grocer think. And you’ve clearly nailed a pain point that can make money. Now it is time to take the risk of running with it.
Every big idea comes with risk. You can’t step out into the world of entrepreneurial thinking and business development without it. Your idea may fail. It will also be time consuming, demanding, hungry for money, and hard work. It is unrealistic to expect that your project will leap out into the world and be an unmitigated success.
It is also unrealistic to assume that it isn’t worth taking this risk.
There are steps that you can follow to ensure that your risk is managed so you aren’t blindly leaping off that cliff…
Step 01: Do your research
No, canvassing your neighbours, friends and family is not doing research. You need to know that your idea will appeal to a broad market and that it will have significant legs. This may sound like daft advice, but you would be surprised how many people think an idea will take off just because Susan in Accounting said so.
Step 02: Understand the costs
Projects are hungry for money and investment. Realistically work out your budgets and how much it will cost to take your project off the ground and then stick to it.
A calculated risk is a far better bet than one that shoots from the hip and hopes for the best. You can also use this as an opportunity to draw a clear line under where you will stop investing and end the project. If it keeps eating money and isn’t getting anywhere with results you need to be able to walk away.
Step 03: Know when to walk away
As mentioned before, this can be defined by a line you’ve drawn in the proverbial sand (and budget) but no matter where you draw this line, you have to stick to it. Often, when time, money and energy have been poured into a project it can be incredibly hard to walk away.
You think ‘but I have put so much into this, just one more’ and then it gets to a point where the ‘just one more’ has taken you so far down the line that walking away feels impossible. Leave. Learn the lessons. Apply them to your next project.
Mind The Gap
The entrepreneur’s guide to finding the gaps and building the right solutions.
Innovation may very well be the key to business success but finding the gap into which your innovative thinking can fit is often a lot harder than people realise. Some may be struck by inspiration in the shower, others by that moment of blinding insight in a meeting, however, for most people finding that big idea isn’t that simple. They want to be an entrepreneur and start their own high-growth business, but they need some ideas on how to find that big idea.
Here are five…
It sounds trite but networking is actually an excellent way of picking up on patterns and trends in conversation and business problems. The trick is to note them down and pay attention. Soon, you will find patterns emerging and ideas forming.
2. Look for pain
Just as networking can reveal trends in the market, so can spending time reading. The latter will also help you find common business pain points. These are the touchpoints that frustrate people, annoy business owners, affect productivity, or impact employee engagement.
Be the Panado that fixes these pains.
This is probably the most annoying of the ideas, but it is unfortunately (or fortunately) very true. Luck does play a role in helping you capture that big idea. However, luck isn’t just standing around and random people offering you opportunities. Luck is found at networking events, it is found in research and it is found in conversations with other entrepreneurs.
4. Luck needs courage
You may have found the big idea through your network, a pain point or pure blind luck, but if you don’t have the courage to take it and run with it, you will lose it to someone else.
Being bold in business is highly underrated because most people assume that everyone is bold and prepared to take big leaps into the unknown. However, not all brilliant entrepreneurs were ready to throw their family funds to the wind and leap into an idea – they were courageous enough to figure out a way of harnessing their ideas realistically.
5. Pay attention
This is probably one of the most vital ways of finding a gap in the market. Often, people are so busy that they don’t really pay attention to that niggling issue that always bothers them on a commute, or in a mall, or at a meeting. This niggling issue could very well be the next big business opportunity. Pay attention to it and find out if that issue can be solved with your innovative thinking.
5 Things To Know About Your “Toddler” Business
As you navigate this new toddler phase of your business, here are five things to bear in mind.
Ah, toddlers. Those irresistible bundles of joy bring a huge amount of energy, curiosity and fun to any family – but there’s also frustration and worry that comes with their unpredictability, as they grow and start to become more independent. If you own a business and it’s successfully past its “infancy” of the first year or so, it’s likely it will also go through a toddler stage of its lifecycle.
Pete Hammond, founder of luxury safari company SafariScapes, agrees with this. “Our business is now three and a half years old, and we’ve found that we’re not yet big enough to justify employing a large team of people to handle the day-to-day admin tasks, yet we still need to grow the business as well,” he says. “As a result, our main challenge is finding the time to step back and see the bigger picture. Kind of like when you are raising a busy toddler and you spend most of your time running after them!”
As you navigate this new toddler phase of your business, here are five things to bear in mind:
1. This too shall pass
Everything in life is temporary – and that goes for both the good and the bad. It’s as helpful to remember this when you’re facing the might of a toddler temper tantrum, as it is when you’re facing throws of uncertainty in your business. If your new(ish) venture is going through a rough patch in its first few years, it can be easy to think about giving up – but don’t. As long as you have an overall big idea that you believe can add value to your customers, keep pushing through the rough parts until you come out the other side.
2. Appreciate what this phase brings
The toddler years mean that the initial newborn joy is officially behind you. But these small humans also bring their own kinds of joy, as you watch them learn new skills, say funny things, and give affection back to you. While your two-year-old business may not hold the same exhilaration for you as it did during those first few months, there are now different things to appreciate about it: Maybe you’re expanding your product range, or employing new people who can take the workload off you.
3. Establish boundaries
Toddlers thrive on boundary and routine – and your toddler business will too. As it grows into a new phase, try and establish limits in terms of the type of clients you want to work with and the type of work you’ll do. It’s also a good idea to make a decision about the hours you’ll work and when you’ll switch off, which will help you establish a good work-life balance.
4. Take a break
Every parent with a toddler needs a break every now and then, even if that means a walk around the block (on your own!), a dinner out with friends, or even a few days away. The same is true for a demanding small business: every so often, remember to take time out to rest properly, where you switch off your laptop and completely unplug. You’ll return much more inspired and resilient to deal with the everyday uncertainty that it brings.
5. Give it space to make mistakes
While the unpredictability of a young business can be stressful and tiring, it’s also a time for trying new things without the risk of huge consequences if they don’t quite work. After all, it’s much simpler to change your USP if you’re a small business employing a few people, rather than a big company where 50 people are relying on you for their salary, or where you’ve received a huge amount of investment capital. While you may fail in some of the things you try with your business (in fact, this is almost guaranteed), see it as a toddler that’s resilient enough to pick itself up, dust its knees and keep moving forward.
During this phase of business growth it’s also essential to have the right type of medical aid cover. There are medical schemes such as Fedhealth which has a number of medical aid options and value-added benefits to ensure that your health and wellness is taken care of too. After all, the healthier you and your staff are, the more productive your business will be – during the toddler (business) stage and beyond.
While this phase can be frustrating, it’s a sign that your business is growing and adapting, rather than remaining in its infancy, and that can only be a good thing! So embrace the difficulties, learn from them, and watch as your business strides forward confidently into the next exciting phase.
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