A business idea isn’t everything, although having one is a good start. It calls for asking ourselves a few questions, which we set out in our article 15 questions to evaluate a business idea. Basically, we need a product, a market and the ability to bring the product to that market. But do we know which market to focus on? What is our market? Here are 7 steps to define your market, published in Entrepreneur magazine and based on advice from Lynda Falkenstein.
There are two basic markets you can sell to: consumers (individuals) and businesses. These divisions are fairly obvious. For example, if you sell women’s clothing in a shop, your target market is individual consumers; if you sell office supplies, your target market is businesses.
According to Lynda Falkenstein, no business, and especially no small business, can be “all things” to all people. The more narrowly you can define your target market, the better. This process is known as creating a niche market, and it is key to success, even for the largest companies.
“A lot of people talk about finding a niche as if it were something under a rock or at the end of the rainbow, and that’s nonsense,” says Lynda Falkenstein. Niche markets don’t fall into your lap by chance, and you don’t simply stumble upon them; they have to be carefully designed.
Creating a good niche, Falkenstein advises, involves a seven-step process:
1. Make a list
Who do you want to do business with? Be as specific as possible: identify the geographic area and the types of businesses or customers you want to target with your product. If you don’t know who you want to do business with, you won’t be able to make contacts. “You have to recognise that you can’t do business with everyone,” Falkenstein warns. Otherwise, you risk burning yourself out and confusing your customers.
2. Focus
A clothing retail business isn’t a niche, although it is a field or sector. A more specific niche might be maternity clothes for executive women, or plus-size clothing. To start this focusing process, Falkenstein suggests these simple techniques:
- Make a list of the things you do best and the skills involved in each of them.
- List your achievements.
- Identify the most important lessons you have learned in life.
- Look for patterns that reveal your style or approach to solving problems.
Your niche should grow naturally out of your interests and experience. For example, if you spent 10 years working at a consulting firm but also spent 10 years working for a small family business, you might choose to start a consulting business that specialises in small family businesses. (It’s just an example.)
3. Picture your customers’ needs and empathise with them
A successful business follows what Falkenstein calls the platinum rule: “Do unto others as they would have done unto them.” Look at the world from your potential customers’ point of view. That way you can identify their needs and wants. The best way to do this is to talk to potential customers and pin down their main concerns and needs.
4. Synthesise
At this stage, your business idea should start to take shape. A good niche market has four qualities:
- It takes you where you want to go; in other words, it fits your long-term vision.
- Somebody else wants it, namely your customers.
- It is carefully planned.
- It evolves, letting you develop different ideas and reap the benefits of creativity while keeping your core business. That would ensure long-term survival, not only of the business but also of the entrepreneur’s interest and passion.
See also: 5 tips for turning your passion into a business
5. Evaluate
Now it’s time to evaluate your proposed product or service against the four criteria in step 4. You might realise that the business you want to start requires constant travel and weeks away from home. That would mean it fails one of the criteria above, “it takes you where you want to go”, and you risk wearing yourself out in the medium term, or it could simply make you miserable and be far removed from your real passion.
6. Test
Once you are clear about the product or service, don’t be afraid to try it out on some consumers and ask for their opinion, and not just on friends and family, since their advice may not be entirely impartial. Find customers willing to act as guinea pigs, even at a much lower price or practically free, especially if you will have to invest more money later. That’s the only way to find out what you can improve.
7. Go for it
Now it’s time to put your idea into practice. For many entrepreneurs, this is the hardest stage. But don’t be afraid: if you’ve done your homework, entering the market will be a calculated risk, not just a game of chance. Bear in mind that the worst that could happen is that your attempt fails. And we start from the premise, cliché as it may sound, that failure is the only thing you’re guaranteed if you don’t try.
Further reading
- What the Mafia can teach us about business
- The entrepreneur’s mindset, according to Donald Trump
- Profitable businesses for 2013: a summary
Featured image: Mutney, CC0 1.0, via Wikimedia Commons.
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