How do you define a target market?
Try to describe your target market with as much detail as you can. Resist the temptation to be too general in the hopes of getting a larger slice of the market. That’s like firing 10 bullets in random directions instead of aiming just one at the centre of the mark – expensive and dangerous.
Try to describe your target market with as much detail as you can, based on your knowledge of your product or service. Rope family and friends into visualisation exercises (“Describe the typical person who will hire me to paint the kitchen floor to look like marble…”) to get different perspectives – the more, the better.
Here are some questions to get you started:
- Are your target customers male or female?
- How old are they?
- Where do they live? Is geography a limiting factor for any reason?
- What do they do for a living?
- How much money do they make? This is most significant if you are selling relatively expensive or luxury items. Most people can afford a carob bar. You can’t say the same of custom murals.
- What other aspects of their lives matter? If you’re launching a roof-tiling service, your target customers probably own their homes.
Why is it important to define your target market?
The first thing that you will have to ask yourself is who is your ideal customer or client? If you don’t have an answer for this then it is not advisable to go any further.
In marketing, if you don’t have a target market, you are taking a chance with your time, money and your business. Take the time to sit down and re-look at your offering and then decide what type of person would be perfect for your product or service. It’s all about, Geographic’s, demographics and psychographics. You need to know who you are talking to.
Once you know who your target market is, you can begin designing a plan around that. You can decide how you will market to them, how they will get to know your brand and how they will take a liking to your product or service.
If you try and send out a mass marketing message, you will end up losing half of your target market simply because it doesn’t apply to them. By refining your marketing approach you won’t have to waste your marketing budget by speaking to the wrong market. Being focused allows for effective marketing strategies and provides you with a better return.
What criteria should I use to define a target market more narrowly?
Once upon a time, business owners thought it was enough to market their products or services to “18- to 49-year-olds”. Those days are a thing of the past. Because the consumer marketplace has become so differentiated, it’s a misconception to talk about the marketplace in any kind of general way anymore.
Now, you have to decide whether to market to socio-economic status or to gender or to region or to lifestyle or to technological sophistication. There’s no end to the number of different ways you can slice the pie.
Further complicating matters, age no longer means what it used to. Fifty-year-old baby boomers prefer rock ‘n roll to armchair travel; 30-year-olds may still be living with their parents. People now repeat stages and recycle their lives. You can have two men who are 64 years old, and one is retired and driving around in a Beemer, and the other is just remarried with a toddler in his house.
Generational marketing, which defines consumers not just by age, but also by social, economic, demographic and psychological factors, has been used since the early 1980s to give a more accurate picture of the target consumer.
A newer twist is cohort marketing, which studies groups of people who underwent the same experiences during their formative years. This leads them to form a bond and behave differently from people in different cohorts, even when they are similar in age. For instance, people who were young adults in the 1950s behave differently from people who came of age during the tumultuous ’60s, even though they are close in age.
To get an even narrower reading, some entrepreneurs combine cohort or generational marketing with life stages, or what people are doing at a certain time in life (getting married, having children, retiring) and physiographics, or physical conditions related to age (nearsightedness, arthritis, menopause).
Today’s consumers are more marketing savvy than ever before and don’t like to be “lumped” with others, so make sure you understand your target market. While pinpointing your market so narrowly takes a little extra effort, entrepreneurs who aim at a small target are far more likely to make a direct hit.
Why do I need a business plan?
The process of developing your business plan allows you to focus on the business and how it’s going to operate.
I’m starting my own business and have downloaded business plan templates from your website. But it seems like a huge amount of information is required and it’s going to take me ages to complete. Exactly why do I need a business plan?
Starting, and developing, a sustainable business takes more than just a good idea, a superior product or great trade skills. Being the very best electrician, fashion designer, or website developer may cause you to be an excellent employee in a company, but it will not guarantee that you will be able to grow a successful business of your own.
An employee only needs to focus on his specialised role in the company, but a business owner needs to focus on every single aspect of the entire business.
You need a map to success
Building a business is like building a house. Can you imagine building a house without any designs or drawings? Or starting to build without first raising sufficient money to complete the house?
This is no less foolish than trying to build a viable and sustainable business without first sitting down and planning every aspect of your business. How many people could successfully build a house if all they had were some building materials and a picture in their mind of what they wanted their house to look like?
Sadly, this is exactly what happens to so many small businesses in South Africa. They start out with a good idea, some resources and practical skills, and they begin their businesses without any further planning or research. A recent survey revealed that only one in five small businesses manage to survive beyond three years.
There are many reasons why businesses fail, but in most cases, these failures could have been avoided if they had developed a comprehensive business plan before starting their business.
As with building a house, you will need to plan and develop beyond the scope of just your area of skill or expertise. Being a great bricklayer will help you to build the walls, but you will need more than just bricklaying skills to successfully complete the entire project. Similarly, having a skill, or a thorough knowledge of your products and services, will help you to build your business, but you will need more than just this to be successful.
Things to think about
- You will need to research your industry, market and competition.
- You must consider your marketing strategy, target market, ideal location
- Know your potential customers “needs” and “wants”
- What are your operational and management structures?
- You must consider the financial components of running your business. This includes properly costing your products and services, preparing a realistic cash flow forecast and sourcing any required start-up finances.
How many financing institutions would give you a loan to build a house if you were unable to produce proper building plans, architectural drawings and a detailed cost analysis? Similarly, financiers will not give financial aid to your business if you are unable to present a detailed business plan.
A DIY plan is best
It is important that you write your own business plan, and not just pay someone to draw one up for you. Successfully running your own business requires you to know the very fabric and heartbeat of your business, being personally familiar with every aspect of it.
Take the time, effort and energy to personally research, plan and develop the best possible business plan for your new venture.
This is probably one of the most important things you could ever do for yourself and your business!
A business plan is not as difficult as it sounds. There are many great resources out there to help you to draw up a good business plan. If you are going to take the risks, and make the sacrifices, of running your own company, then you cannot afford not to develop a thorough business plan.
Start by breaking it down into its various components and focus on one at a time. Do it yourself, but seek advice and mentorship from others who have experience. Keep working on it, and keep reworking it, until you have developed the best possible business plan for your business. This will be one of the greatest factors in ensuring the success and sustainability of your business.
Do I need a business plan for my one-man business?
All businesses, regardless of size, will benefit from having a business plan.
I have a small business in which I am the only employee. Do I still need to write a business plan?
In my experience (as a business mentor) my answer to this question is a resounding “Yes!”
- One Person Business: As a one-person business, you might feel that you have all the knowledge and information needed to run the business and to steer it in the right direction in your mind. However, a business plan can be used as a working document that can be moulded and adjusted over time as things progress. Michael Gerber in the E-Myth book points out that as an entrepreneur you need to know your primary aim because it provides you with purpose and energy for your daily activities. You should consider asking yourself questions that will help you to understand your primary aim.
By having an official business plan that has been designed by you to steer your course, you can assess any potential opportunities as they arise and make a decision about whether or not they stray from or affect the original vision of your business.
If so, how far does it stray? And if it strays from it too much, will you be able to get back on course after the detour by making a lateral move? Or will it mean that you would have to backtrack after the detour to get back on to the original road.
It’s very important that your business plan is aligned to your life vision because it becomes product of your life.
- Future Growth: You should also look at future growth in the business and the possibility of needing investment such as financial investment at a later stage. Without a decent business plan it will be extremely difficult (if not impossible) to attract any assistance. Ask yourself, “Would you get on board a ship which has no compass and simply trust the captain who says he knows where he is going?” I don’t believe you would. A solid business plan will provide some assurance to potential investors that you do have a plan and know where you’re headed!
- Review: As previously mentioned, your business plan is a working document that should be reviewed every year. Add information where necessary and take out information which has become obsolete or irrelevant. This will allow you to look at opportunities which were perhaps not capitalised on during the year and others that could be put in to the plan for the upcoming year – all the while keeping the vision of the business in mind when making any decisions.
Every business, including the ‘one-person-owned business’, should view a current, relevant and company specific business plan as a powerful tool to assist them in ensuring that the business stays on course and ultimately reaches its full potential.
What information should my business plan include?
Your business plan should capture who you are.
I’m in the process of doing a business plan but am swamped by information overload. Which information and how much detail should I include in the business plan?
The most critical information for any business plan is your vision and mission – the heart of who you are. Take time and effort over this part of your plan because this speaks to the core of everything your business is about and why you started it.
Your passion for your business becomes clear to the reader through the key words of your vision and your motivation behind starting your business is reflected in your mission statement.
This is what makes you, you, and why your business stands out from the crowd. These elements tell the reader this is where your business is headed.
- It can excite a potential investor particularly where there is a “connect” with your dream.
- It allows a marketing agency to properly understand your dreams and put together a package to successfully push your business into your target market.
- It will speak to the heart of a potential employee, creating a desire to work for you and be a part of your team.
Your business plan also serves as a reminder to you the business owner of who and what you are about and in the tough times, it’s your bench mark, for things past, present and future.
6 important elements of a business plan
The guidelines below give you an overview of what the business is about, and demonstrate your research, planning and understanding.
Bear in mind that even if the reader knew nothing about you or your business, that after they have read your business plan, they should have a good idea and enough information to begin making some informed decisions.
Broadly, cover the following:
- Business and industry information
- Type of legal entity
- Where you fit into the related industry
- Your product or service offering and what makes it unique
- Your target market – ie who is your customer
- Marketing – how you plan to reach your target market
- Broad operations and structure of your company
- Financial projections and requirements
- Personal investment into business
- Start-up requirements
- Expected returns
Each business plan is unique and specific to that business, so these are just some guiding principles. And, remember that your business plan should be viewed as a living document that you need to keep up to date and relevant.
You’ll find a free business plan template here.
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