Better Business Idea #42
Business Design Step 1 - Choose The Market
© 2000 by Michael C. Gray
October 18, 2000
Most entrepreneurs start backwards when designing or defining their business; they start with the products or services they will be offering. "We are in the CPA business." "We are in the hardware business."
New businesses would usually be better off by defining themselves in terms of the market they serve. "We market paralegal services to litigation attorneys." "We market hospitality to visitors at the Dallas-Fort Worth International Airport."
Marketing guru Gary Halbert challenges people who come to his seminars: "What advantages would you like for selling hamburgers? Golden arches? A famous clown? A billion dollar advertising budget? Give me a starving crowd and I'll beat you every time!"
Identifying a "hungry," "irrational" marketplace is a key for business success.
For example, Jeff Paul sells sets of golf clubs for thousands of dollars, sight unseen, to golf enthusiasts. A fishing expert sells expeditions for thousands of dollars to teach fishing enthusiasts how to "think like a fish"!
When you don't start by carefully defining your market, you risk trying to sell to people with no interest or enthusiasm for what you have to offer or facing competitors that will make succeeding a very expensive proposition. You don't intentionally seek to do battle with Wal-Mart or Home Depot.
The more tightly you can define your market, the higher the value your product or service becomes. A generic time management program might sell for $49 to $69. A time management program for heart surgeons might sell for $2,500 to $5,000 or more.
If you think you can make up margin with volume, consider how much your selling expenses will be to get each sale under each scenario. When you "crunch the numbers," you may find you can earn considerably more with less resources and effort when selling to a more carefully defined "niche." Not only that, a motivated customer will be more inclined to come to you instead of making you pursue him, along with a pack of competitors.
So, when designing or re-engineering your business, put "first things first." Find "a hungry crowd" and find out what they're hungry for. That will lead to the answers for the other parts of your business plan.
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