Defining Your Market

How big of a market is there for your service or product? How well is that market being served? How have you differentiated yourself from your competition? These are all vital questions to answer before deciding to pursue a business opportunity.

If you can't answer these questions then you haven't found any profitable business ideas. Keep looking!

You need an adequate market to sell to and your value proposition ought to differentiate you from your competition. If it doesn’t, think twice before proceeding.

Consider whether your business will sell to a new person every time or has built in repeat business. For example, selling new cars depends on finding a new buyer each time. Some buyers keep coming back every few years, but the time between sales and the likelihood of the repeat buyer is lower.

Consider the grocery store owner. There is an element of loyalty there that once a buyer is obtained you are likely to see them every week. Each new customer you bring in, if treated well, will be like an annuity that keeps paying off regularly. The more your business model caters to repeat buyers the easier it will be to succeed.

The market you serve needs to be evaluated on a big picture basis also. In difficult times you will find it easier selling necessities than selling discretionary items.

During this economic crisis I see clients who are serving the necessities market rather than the discretionary market doing well. Theirs are profitable business ideas.

Examples of necessities would include products and services people can’t be without: food, medicine or basic heath care, shelter, basic business services, and repair services.

Examples of discretionary items are things people can defer or even put off permanently: a new car, a second home, some types of elective surgery, higher end clothing, new furniture, and anything that depends on credit to sell.

Further, if your market or industry is growing it is easier to succeed. In a growing industry you will benefit from the overall growth as you are carried along with it. In a declining industry you will sink a little with everyone else.

Take the housing industry as an example: in 2008 the market contracted significantly for a number of reasons. If you were a home builder, no matter how good you were, you didn’t do as well as when the markets were booming.

Know your market. There is an ideal customer and an ideal market for you and your value proposition. You must be able to articulate it if you have any chance of meeting it and succeeding in business.

by Steven Schlagel - June 20, 2009

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