This article is part of our Business Startup Guide—a curated list of our articles that will get you up and running in no time!

If you build it, they will come.

That’s what I believed when I was first starting out. I assumed that if I opened a business, customers would just show up—no major marketing effort required. Other entrepreneurs take the complete opposite approach and treat marketing as if it’s the 1916 Battle of the Somme: they throw all of their resources in the general direction of their intended audience and hope something hits its mark.

The “if you build it they will come” approach is pretty risky. Just because it worked in Field of Dreams doesn’t mean there’s any reason at all to think that your ideal customers—the ones who both need your product or service and will pay for it—are just going to magically find you and start showing up in droves with their dollars. There’s a greater chance that Kevin Costner will show up at your door in a baseball uniform later today.

“Don’t trust Kevin Costner for marketing advice” is probably a good rule of thumb.

Hear more about finding your target market with Peter and Jonathan on the twelfth episode of The Bcast, the official Bplans podcast:

Click here to subscribe to The Bcast on iTunes »

What is target marketing?

Target marketing is researching and understanding your prospective customers’ interests, hobbies, and needs so that you can focus your message and your marketing budget on the specific segment of the market that is most likely to purchase your product or service.

Identifying your target market: Who, what, why, how

Identifying your target market is part of business planning—notice that it’s planning as an ongoing action not just writing a plan as a one-time event. Gathering information about your target market, like business planning, shouldn’t be an exercise you do once and then never revisit. For as long as you are in business, you’ll always need to be thinking about how to better understand your ideal prospective customers.

One of your first steps in starting a business (or growing one) is identifying your market— the subset of the population who need and will pay for what you’re selling. Think of it this way: if your business idea is to revolutionize fashionable hiking shoes made from ethically sourced materials, it can be tempting to think that your target market is everyone with feet.

But realistically, the people most likely to purchase your shoes probably share some similar characteristics: they’re fashion-conscious but prioritize comfort over style. They would rather buy something that lasts for 700 miles than 200, even if it costs more.  

You can make some hypotheses, like that because of your price point, college students are less likely to buy them than people in their mid-thirties, or that people who live in areas where hiking and nature are easy to access are more likely to buy than people in dense urban areas.  Part of target marketing is identifying who your ideal customers are, and then testing your assumptions about them to make sure you’re not barking up the wrong tree.

You’ll want to be able to identify who your ideal customer is, where they live (or buy), what motivates them to make choices, and how they behave, or the steps they take in making a purchase.

Who: Demographics

Who needs your product or service? Include basic demographic details such as age, gender, family size, educational level, and occupation.

“Our target customer is male-identifying, age between 28 and 45 with a relatively small family—a partner and 0-1 children. He works a white collar job and makes slightly more than the average median income.”

Where: Geographics

Where are your customers? These are the places your customers can be found (i.e., their zip code), and be sure to learn details like the size of the area, its population density, and its climate.

“We think that our customers are more likely to live in suburban areas—zip codes with slightly above average median incomes, in areas with a relatively mild climate all year long, like San Diego.

Why: Psychographics

Why do your customers make the choices they make? This is personality and lifestyle information that will help you figure out your customers’ buying patterns. For example, if you know why your customers buy your product, you can figure out how much of your product they need and how often they need to buy it. Also consider what benefits you can provide over your competitors, and how loyal your customers are to you or your competitor (and why).

“We think that our customers probably buy one new pair of hiking shoes each year. They’re relatively loyal when they find a brand that works, but we think our socially conscious mission and the fact that no one else is manufacturing shoes like ours in the US will resonate with them.”

How: Behaviors

How do your customers behave? All customers are buying products to fulfill a need, but how do they regard that need? How do they regard your product? How much information do they have on this need or how your product fulfills it, and what are their information sources?

“Our customers are generally not big impulse buyers. They want information on how products are made before they buy them, and they’re likely to do several online searches before they buy.”

All the examples above represent assumptions—things that you think are true about your ideal customers. But your work isn’t done. Now you need to do the work of figuring out whether your assumptions are correct, and revise them if they’re not. Finding out your wrong at this stage is actually something to get excited about, so don’t let your ego get in the way. You’re better off finding out that you need to shift your ideas (and your resources) toward another demographic than proceed with assumptions are incorrect or untested.

Researching your target market

New technologies can make nailing down your demographics and psychographics much easier (and cheaper) than in the past.

Start with social. If you run social media profiles for your business, most social sites provide a free demographic breakdown of your followers in the backend analytics area.

Leverage email addresses. If you have your customers’ email addresses, services like TowerData can pull detailed demographic information for you.

Use Census information. If you have your customers’ zip codes, there is a ton of free information available to you from the U.S. Census Bureau—it might not drill down to your exact customers’ households, but it’s free and it’s a very good starting point.

If you’re already up and running, leverage your own sales data. Data from your payment processor or inventory history could also be helpful. What are your customers buying, and when? How much is the average purchase in your store? What time of day is the busiest? When do purchases spike, and when do they fall, and can you develop any hypotheses to explain the fluctuations?

Ask your customers. You can also use email, phone, or in-person customer surveys. You don’t necessarily need large numbers of participants to learn more about your customer base—you might be surprised how much you’ll take away from just 5-10 good conversations. If you’re worried about being able to recruit survey participants, offer a free gift or store credit.

At the bare minimum, these are the things you should know about your target customers:

• What is their gender? Yes, this is the 21st century, but gender identity still makes a difference when it comes to patterns in purchasing decisions for a variety of complex reasons.
• How old are they? “18 to 49” won’t fly anymore. The majority of millennials and boomers have feet, but what they choose to put on them, and how they make purchases pretty different.
• What are their interests or hobbies? Finding out what people are into will help you connect with them. Even if they don’t buy from you, you’ve made a new friend. Everyone needs friends.
• Where do they live? Is geography a limiting factor for your customers (or for you)? Are they able to get to you easily? Is there plenty of parking? Public transportation? Can you deliver? I once purchased a coffee shop tucked in a strip mall between an antique store and a Gold’s Gym. On the upside, most of my 12 or so regular customers were either super fit or could fix an old watch.
• How do they make a living? Knowing what your primary customers do can help you adjust your hours to fit their needs, or help you devise special offers. People like to feel special.
• How much money do they make? Whether you’re selling gold-plated sailboats or glow sticks in bulk, it’s a good idea to know how much—or how little—your customers are willing to spend.
• Do they own their own homes or do they rent? Depending on the answer and what you sell, you may need to tweak your messaging to resonate with your audience.

The key here is to collect information, and then compare it to the assumptions you’ve made about your customers. What’s surprising? What strikes you as an untapped opportunity? Did you hear the same or similar complaints/suggestions from multiple people?

This may also be a good time to create a buyer persona for your business, and/or to conduct a SWOT analysis of your business, so you can develop a fully fleshed-out business strategy.

How businesses can use target marketing

Whether you’re still in the process of starting your business, looking for an innovative opportunity to grow your business, or want to protect the business you’ve already built, target marketing is an important tool.

Beat your competition in niche markets

If you’re opening a bookstore or selling sporting goods, you’ve got some big-time competition. Mega-retailers like Amazon and REI aren’t just going to give up a piece of their pie to a scrappy upstart. Lucky for you, we’re living in the days of the niche market! You can use target marketing to carve out your own space in the marketplace.

Case study: The wireless industry

The wireless industry is a great example of small businesses succeeding with niche markets and target marketing. The biggest wireless providers—AT&T, Verizon, Sprint—are focused on the biggest markets, and they have shareholders to answer to every quarter; despite being multi-billion-dollar companies, they don’t have the resources (and it isn’t in their best interest) to staff their support centers with multilingual employees or to offer the most competitive rates on cell phone plans.

So you know what they do instead? They run wholesale divisions that sell small businesses the rights to their wireless networks, and those small businesses then run after the niche markets whose interests and needs are ignored by the big wireless companies.

SIM Shalom targets Israeli-American immigrants by offering Hebrew-language support and cheap calls between the U.S. and Israel.

Kajeet targets parents who want to offer restricted phone lines to their young kids, offering the ability to turn off the phone’s network during certain periods of the day (like school hours, or bedtime) and to block certain phone numbers or websites, as well as the ability to activate GPS notifications so that parents know when their child has arrived at after-school activities.

Consumer Cellular targets senior citizens with simpler plans, a curated selection of phone options, a focus on affordability and reliability, and a partnership with the AARP.

GIV Mobile targets community-minded individuals who are looking for ways to “give back” by offering to donate 8 percent of a user’s monthly bill to a charity of their choice.

Virgin Mobile is after young adults with “back to school” marketing campaigns, pay-as-you-go plans with no credit required, casual website and marketing copy, and a focus on trends.

Identifying and focusing on target markets is what defines each of these businesses. Each one knows that their particular offering isn’t for everyone. They’re not just trying to market to everyone who needs or wants a cell phone. They’ve identified specific audiences with particular needs that aren’t being addressed by the biggest players in the marketplace.

Today, finding out what your competitors are (and aren’t) doing can be as easy as running a Yelp search. Studying your competitors’ customer feedback can help you identify blind spots in their businesses that you can exploit for your own gain.

Build a loyal customer base

Remember, identifying your target market isn’t something you do once and then check off a box. Up and running businesses should create systems to regularly ask your current customers feedback on what they like (and don’t like) about doing business with you.

The great thing about getting to know your customers is that not only will you be able to track down new customers just like them, but your tried-and-true customers will become more loyal—and spend more money

Case study: Sephora

One example that comes to mind is Sephora, a makeup and skincare retailer. My wife shops there for her makeup and skincare almost exclusively—why?

When I asked her, she didn’t say that she shops at Sephora every time she needs makeup and skincare products because they’re the only place that sells particular items (they aren’t), or because they have the best selection (they don’t), or because they offer free shipping (only on orders greater than $50, apparently).

The answer was that she gets “really good” free samples with her order and that she accumulates reward points with every purchase for even bigger and better free samples later. Even better, the selection of free samples is always changing, and she gets to choose the samples she wants from a wide selection of options.

By handing out free samples and—even she admitted—pretty-close-to-worthless reward points, Sephora’s gained an extremely loyal customer.

Would this strategy work for everyone? No way. But it works really, really well on a 30-something woman who wants to feel like her favorite mascara/eye cream/perfume is worth the hefty price tag.

Clearly, Sephora’s tapped into the psychographics of their target customer base. How can you do that for your own customer base? Research the types of loyalty deals your competitors even highly successful businesses outside of your industry are offering. Incorporate the research that you gathered on your target market to figure out what your customers are going to find most valuable.

Your knowledge of their hobbies, living situation, and typical job will help you craft loyalty programs that will resonate. Don’t forget to ask your customers what they think as you test out different programs. That direct feedback is the most valuable research that you can gather and will help you build a loyal customer base.

Getting to know your customers, and giving them what they want, is a surefire way to build a loyal customer base—the kind that gives your business 5-star reviews online, and that tells all their friends about how much they love you. (You know, the kind of customers you want.)

In conclusion

The only thing I learned from my do-nothing plan was to never take marketing advice from a disembodied voice in a Kevin Costner film. Had I done any research at all, I would have known that’s not even the real quote.* Doing nothing won’t help your business, and it will almost certainly hurt it in the long run. The everything-but-the-kitchen-sink marketing plan where you throw resources into marketing to everyone with a pulse usually ends in similar disappointment: a lot of zeros on the bank statement, and all in the wrong places.

Target marketing is going to require some upfront work, but the rewards are huge and well worth the effort.

*The correct quote is, “If you build it, he will come.” Which is, in fact, more representative of the number of customers I attracted with my old marketing plan. 

Doing a market analysis might sound overly daunting and formal, but don’t be dissuaded. It’s actually really important, and it’s not all that complex.

A market analysis is the process of learning the following:

• Who are my potential customers?
• What are their buying and shopping habits?
• How many of them are there?
• How much will they pay?
• Who is my competition?
• What have their challenges and successes been?

The market analysis is one of the most important parts of any startup strategy. It can actually help reduce risk because if you really understand your potential customers and market conditions, you’ll have a better chance of developing a viable product or service.

It should also help you get clear on what exactly makes you different from your competition, which can make or break your chances of standing out in a crowded landscape.

However, don’t fall into the trap of simply saying that your solution is for everyone. Ultimately, setting some parameters around your target market will help you focus your resources.

Ultimately, your market analysis should enable you to:

1. Avoid putting a lot of resources and time into creating a product or service before you’ve determined that your solution is needed.
2. Determine that the need for your product or service is big enough that people will pay for it.

Do you even need to do a market analysis?

Bear in mind that all new businesses are different, and strategies for structuring a business plan can be different depending on the goal of the plan or the intended audience. If your business is quite small and you know your customers inside and out, a deep, formal market analysis might not be the best use of your time.

For instance, if you are writing an internal business plan, meaning that you’re not going to use it to try to secure a loan or other funding, you may not have a specific reason to spend time reviewing industry data to corroborate your financial forecast. Be sure to assess the value of this information for your business; determine why you’re doing an analysis in the first place so that you don’t waste time and energy on an unnecessary aspect of your plan.

On the other hand, if you’re not absolutely clear on what makes your business different from the competition, or if you have made (but not tested) some assumptions about who will be interested in your product or service, you might want to consider at least an abbreviated market analysis. You’ll want to make sure that the business you’re building is solving a real problem, and that consumers both desire your solution and are willing to pay for it. A market analysis is a good way to get clarity.

Finally, if you are seeking funding, a market analysis is going to be key data to convince your audience that your business idea has the facts and hard numbers to back it up.

Market analysis and your business plan

It’s smart to write a business plan, especially if you are beginning a new business venture. Even if you’re a sole proprietor or don’t intend to borrow any money to get your business off the ground, it’s important to have a clear plan in place. The market analysis isn’t just one part of a successful business plan—it’s one of the best reasons to write one.

If you do need banks to lend you money or investors to jump on board, a market analysis section is required, as savvy lenders or investors will need to know that the business you’re pitching has viable market appeal.

Either way, a solid formal business plan or Lean Plan complete with market analysis will be invaluable. You’ll need to identify your potential customers and attract investors, and it will help you to be clear about what you want to do with your business, both now and in the future.

The time you spend doing the research and putting it all together will come back to you many times over in dollars earned and heartbreaks avoided. You’ll look like a professional, and you’ll outshine the competitors that didn’t write one.

Because you’ll know the size of the mountain you’re about to climb, you’ll be able to pace yourself and prevent problems in the future. But most importantly, thoroughly understanding your market means that you’ll be able to build the best solution possible for your customers’ problem.

What to include in your market analysis

Your market analysis should include an overview of your industry, a look at your target market, an analysis of your competition, your own projections for your business, and any regulations you’ll need to comply with.

1. Industry description and outlook

This is where you’ll outline the current state of your industry overall and where it’s headed. Relevant industry metrics like size, trends, life cycle, and projected growth should all be included here. This will let banks or investors see that you know what you’re doing, and have done your homework and come prepared with the data to back up your business idea.

2. Target market

In the industry section of your market analysis, you focused on the general scope. In this section, you’ve got to be specific. It’s important to establish a clear understanding of your target market early on. A lot of new entrepreneurs make the rookie mistake of thinking that everyone is their potential market. To put it simply, they’re not.

For example, if you’re a shoe company, you aren’t targeting “everyone” just because everyone has feet. You’re most likely targeting a specific market segment such as “style-conscious men” or “runners.” This will make it much easier for you to target your marketing and sales efforts and attract the kinds of customers that are most likely to buy from you.

This is a good thing; by narrowing in, you’ll be able to direct your marketing dollars efficiently while attracting loyal customers who will spread the word about your business.

The target market section of your business plan should include the following:

• User persona and characteristics: You’ll want to include demographics such as age, income, and location here. You’ll also need to dial into your customers’ psychographics as well. You should know what their interests and buying habits are, as well as be able to explain why you’re in the best position to meet their needs.
• Market size: This is where you want to get real, both with the potential readers of your business plan and with yourself. How much do your potential customers spend annually on the types of products or services you plan to offer? How big is the potential market for your business?

3. Competitive analysis

This is the section in which you get to dissect your competitors, which is important for a couple of reasons. Obviously, it’s a good idea to know what you’re up against, but it also lets you spot the competition’s weaknesses. Are there customers that are underserved? What can you offer that similar businesses aren’t offering?

The competitive analysis should contain the following components:

• Direct competitors: What other companies are offering similar products and services? What companies are your potential customers currently buying from instead of you?
• Indirect competitors: If your company is creating a new product category, perhaps you aren’t competing with similar companies, but instead competing with alternate solutions. For example, Henry Ford wasn’t competing so much with other car companies, but was instead competing with other forms of transportation such as horses and walking. A more modern example might be a to-do list application, where the indirect competition would include notebooks and hand-written lists.
• Competitor strengths and weaknesses: What is your competition good at? Where do they fall behind? Get imaginative to spot opportunities to excel where others are falling short.
• Barriers to entry: What are the potential pitfalls of entering your particular market? What’s the cost of entry—is it prohibitively high, or can anyone enter? This is where you examine your weaknesses. Be honest, with investors and yourself. Being unrealistic is not going to make you look good.
• The window of opportunity: Does your entry into the market rely on time-sensitive technology? Do you need to get in early to take advantage of an emerging market?

4. Projections

At this point, your projections are educated guesses, so don’t worry about absolute accuracy. However, it pays to be thoughtful and avoid hockey-stick forecasting.

• Market share: When you know how much money your future customers spend, you’ll know how much of the market you have a chance to grab. Be practical, but don’t sell yourself short. Make sure you are able to explain how you came up with your numbers. Don’t make the mistake of saying that you’ll easily get 1 percent of a huge market, and that this is enough to grow a successful business. Instead, do a bottom-up projection where you explain how your marketing and sales efforts will enable you to get a certain percentage of the market.
• Pricing and gross margin: This is where you’ll lay out your pricing structure and discuss any discounts you plan to offer. Your gross margin is the difference between your costs and the sales price. Again, be realistic yet optimistic. Optimistic projections not only serve as a guide—they can also be a motivator.

5. Regulations

Are there any specific governmental regulations or restrictions on your market? If so, you’ll need to bring them up here and discuss how you’re going to comply with them.

You will also need to address the cost of compliance. Addressing these issues is essential if you are seeking investment or money from a lender, and everything has to be legally squared away and above board.

How to acquire the data for your market analysis

Market analyses vary from industry to industry and company to company. The hard truth is that some of the information you wish to include may not be publicly available. A little estimation is okay, but the bulk of your numbers need to be based on facts. Here are some good places to start your market research:

• Your current customers: If your business is already up and running, your current customers are an invaluable resource. They are your existing market. You can use online surveys or social media to gather feedback about buying habits, needs, and other psychographic information.
• U.S. Census Bureau: Here’s where you’ll find demographics you can use to figure out your market share. There is plenty of other information you can use in your market analysis here as well.
• USA.gov: The go-to place for national industry information, as well as links to state and local resources.
• U.S. Small Business Administration: The SBA offers industry guides, development programs, and local resources, as well as loan guarantees when the time comes.
• Bureau of Labor Statistics: The BLS is the place to find out where your industry has been and where it is headed.
• Commerce.gov: The U.S. Department of Commerce has a lot of good general information that you may be able to use, depending on your industry.
• The internet: You can do internet searches to find information about any state or local regulations or licenses you may need for your industry. As always, there’s a lot of stuff out there, so make sure you’re depending on reliable sources. For your market analysis, Wikipedia won’t cut it.

Ultimately, conducting a market analysis will help you uncover any blind spots. It should help you do some initial tests that will verify that your solution is actually addressing a real problem—and many startups don’t last simply because founders failed to figure out if anyone was interested enough in their solution to pay for it.

Whether you do a comprehensive analysis, or just spend a few hours on a leaner version, what you learn can be the difference between thriving and struggling.

When I was a kid, I knew exactly what I wanted to be when I grew up. I was going to be the next Boris Vallejo! (You know, the famous fantasy and sci-fi artist who always painted ripped, shirtless men and buxom, bikini-clad women atop flying dragons and Pegasuses—yeah, I wanted to be him.)

There were two problems with my future career plans though: 1) I wasn’t very good at art, and 2) my parents made it clear there wasn’t a snowball’s chance that they would pay for me to go to art school.

With my adolescent dreams up in flames, I decided to get back at my unsupportive mom and dad the only way I knew how: I became an entrepreneur. And that choice became a different kind of fantasy entirely.

My Story

I stole the ideas for my first startups from other people. In the early 1990s, my brother was working for a company that was going through the roof selling shareware software via catalog. We thought, “Hey, we can do that!” And we did, until the internet came on the scene a couple of years later and left us holding our floppy disks in our hands.

My next venture didn’t fare much better. I tried to catch the specialty coffee wave and was swept under a tsunami of Starbucks’ venti lattes.

With my third business, I didn’t even try to be original—I purchased a custom framing franchise and piggybacked to success on someone else’s name.

What I’m saying is, I’m wholly unqualified to offer startup advice. That’s why I called in some experts to share their stories and tips:

1. Write it down on a napkin

The expert: David Ciccarelli, Voices.com

Voices.com, an online marketplace that matches voice actors with advertising agencies and TV and radio stations, began in 2004 as an idea scribbled down on a napkin by newlyweds David and Stephanie Ciccarelli. “When we first got started, it was just the two of us,” says David. “I owned a recording studio and Stephanie was a trained singer who was doing voiceover work.”

He says they both realized the future of the voiceover industry was in digital, even while (ironically) penning the idea for their startup on a decidedly analog surface.

David sold his recording equipment for $50,000 and they borrowed the rest of their seed money from a bank. Today, Voices.com is one of the fastest-growing companies in Canada—not too shabby for a business that began life at the kitchen table.

David’s advice

“Don’t get focused on the tech or how to dominate the market, just identify a problem and set about solving it. By doing so, you’ll be advancing humankind.”

2. Feed a need

The expert: Beth Shaw, YogaFit®

“I realized in the early 1990s that there was no appropriate yoga for fitness professionals,” says YogaFit® founder, Beth Shaw. At that time, she says, most yoga consisted of people sitting on the floor and doing simple poses.

“I earned a multitude of yoga certifications and I realized they did not apply to the regular fitness club member,” she says.

Beth developed her own intensive curriculum and, with the help of seed money from a student, founded YogaFit® in 1994 to fill the niche. Today, that niche has grown into a chasm and YogaFit® has become the largest training school for yoga instructors in North America. The company operates on six continents and boasts more than 250,000 graduates worldwide.

Beth’s advice

“Have a well-rounded understanding of business. Entrepreneurs starting out are typically stronger in sales and marketing than they are in other areas—I think it’s really important for them to get a grasp on financials and operations as well.”

3. Get a little help from your friends

The expert: Rob Biederman, HourlyNerd

HourlyNerd, an online marketplace that connects businesses and MBAs from the top 40 business schools for projects and consulting work, began as a team assignment in a Harvard Business School classroom.

“We were up against a tight deadline where we actually had to invent a business and present to our classmates at school!” says HourlyNerd co-founder and co-CEO, Rob Biederman. “So one night I just sat down and pounded out the business plan.” Rob says he drew inspiration from services such as InnoCentiv, Odesk, and Elance, among others.

Of the six people who started HourlyNerd, three are still running the company, including co-CEO Pat Petitti and CFO Peter Maglathilin. Along the way, the group brought on another classmate, Joe Miller, to handle the technology end. Since then, the company has picked up a number of investors, including Dallas Mavericks owner Mark Cuban.

Rob’s advice

“Only start a business if you are deeply passionate about solving the underlying problem for your customers. If you aren’t, the money (there isn’t much) and the hard work (there’s a lot of it) will beat you before the idea catches on. If you’re passionate, the money and hard work won’t bother you at all.”

4. Get professional help

The expert: Stacy Goldberg, Savorfull

Nutritionist Stacy Goldberg says she tried a lot of things before deciding on the idea for her company, Savorfull, in 2012.

Savorfull provides its Detroit, Michigan, business clients with a surprise mix of healthy, allergy-free (“free from”) snacks delivered straight to their offices for a small monthly fee. She says her idea began to take shape after she went through Bizdom Detroit, an entrepreneurial accelerator program founded by Quicken Loans and Cleveland Cavaliers owner Dan Gilbert.

After that, she used a combination of high-tech and low-tech to develop her idea. “I used several platforms,” she says. “I also used many different colored sticky notes and I use whiteboards constantly.”

Stacy’s advice

“Walk before you run. Think big but start small. See if you even have a market that wants your product—that will PAY for your product!”

5. Crowdsource

The expert: Adi Bittan, OwnerListens

“Before starting OwnerListens in 2011, I spoke with over 100 business owners across 
the country in various sectors and from various business sizes and types,” says company co-founder, Adi Bittan.

She wanted to know what kind of problems they were having in order to find a way to help solve them.

“I asked them what their top ten problems were. If feedback, online 
reviews, reputation, Yelp!, etc., were in the top five, that was two points. If those things were in the top
 ten (but not in the top five), that was one point. In the end, the review
 problem scored 147 points out of a possible 200,” she says. “Only eleven businesses didn’t mention it at all—that’s how I knew it wasn’t just a problem for me, but for every business owner I knew.”

The result was OwnerListens, a service that puts business owners in touch with their customers in order to both improve their businesses and manage their online reputations. Today, the rapidly-growing upstart boasts thousands of clients across the U.S., including industry giants Whole Foods and Philz Coffee.

Adi’s advice

“Not all startups have to reinvent the wheel. Sometimes just making an existing idea a little more efficient or cheaper can be enough—provided the market is big enough.”

Several years ago, when I was just starting out as an entrepreneur, a friend introduced me to a concept he called “Serengeti Management.” His premise was that, as a new employer, I was going to have to deal with any number of different personalities, each represented by a creature you might find roaming the plains of East Africa.

He was joking, of course—your employees aren’t a bunch of animals struggling for survival at a watering hole in Tanzania—but they sure will act like it sometimes.

As I got busy running my businesses, I forgot all about Serengeti Management—for a while. It all came rushing back to me on one of those days I would have rather pulled my eyelashes out with pliers than to have to deal with one more employee crisis.

It occurred to me suddenly that Serengeti Management might actually be a useful management technique.

I needed a better way to quickly identify the different personalities I was dealing with in order to supervise them effectively. After all, I was entrusting my precious business to them. Of course Serengeti Management is reductive, but when you’re operating a new startup, you’ll soon realize that, some days, if you can’t find a way to laugh, you’ll want to run away—maybe even to the Serengeti.

The 5 Types of Serengeti Employees

1. Gazelles

Gazelles are far and away the most bountiful species of employee you’ll encounter on your startup safari. They come in all different personality types and temperaments, but they have one trait that binds them: a near-universal aversion to deviate from the herd. These folks keep their heads down in order to survive until the next paycheck. Because of their resistance to change, you’ll rarely find leaders or innovators among the gazelles. They are usually predictable, but they can be thin-skinned too. In order to preserve their mediocrity, gazelles are often quick to blame others when something goes wrong. If you ever have to hold one accountable, expect him to sprint from crisis to crisis, leaving drama and unfinished projects in his dust.

2. Monkeys

Monkeys are those employees who, though often smart and capable, are prone to goofing off at work. Monkeys can be maddening to supervise, but don’t be too quick to discount their usefulness. Monkeys can bring much-needed levity into the work environment. Although these folks can be disruptive and a challenge to motivate, most of the time the monkeys can be managed—unlike the hyenas.

3. Hyenas

Hyenas are the scavengers of the workplace. They are the opportunists, compulsive liars and backstabbers. Hyenas feed on office gossip as if it was the carcass of a freshly killed gazelle and leave behind hurt feelings and productivity picked clean. Left unsupervised, hyenas will rip your business apart from the inside out.

4. Lions

Lions are easy to spot: they’re the ones whose arrogance often eclipses their abilities. They can come off as know-it-alls or, worse, workplace bullies. Because lions don’t generally tolerate mediocrity, gazelles can be the prime targets for the lions on your staff. If you learn how to manage them though, lions can evolve into some of your most valuable and trusted team members. They often make good salespeople and managers; their confidence can win over customers even as their abrasiveness sometimes spurs conflicts with coworkers.

5. Rhinos

Rhinos are the people who put their nose to the grindstone and plow through anything they’re tasked with. They are solid and dependable. They are also extremely rare. If you run a small to mid-sized company, you’ll be lucky to have one or two on your payroll. Protecting and nurturing your rhinos should be a top priority for every owner/manager.

Managing Your Startup’s Wildlife

Herding Gazelles

Because gazelles are abundant in the workforce, you’ll find yourself surrounded by them as you strike out on your entrepreneurial adventure. They are conflict-avoidant by nature and typically require less management than your other employees, save the rhinos. I’ve employed dozens of gazelles over the years and I’m still ambivalent about them. Yes, they made my job as a manager easier, but they didn’t contribute much to my business’s productivity or growth either. They tend to not make much of an impression during their tenure and even less of one when they leave. I worked closely with several gazelles for years and I’m still hard-pressed to remember their names when I’m asked about them.

Wrangling Monkeys

I like monkeys. I really do. Even though the ones I’ve hired required near-constant oversight and frequent prodding to stay on task, they were a net positive for my businesses. One woman, in particular, had such an infectious sense of humor that she would turn up new customers for my custom frame shop as if by spontaneous generation. The increase in cash flow more than made up for all the time she wasted slacking off. By keeping the rest of the staff in near-constant stiches, she boosted employee morale too. Years later, she’s still a friend and one of my favorite—and most memorable—employees of all time.

Avoiding Hyenas

If I had a time machine, I wouldn’t use it to dial back the clock in order to walk with dinosaurs or to take out Adolph Hitler. Instead, I’d use it to stop my younger self from hiring hyenas. Hyenas can be charming and are often mistaken for lions. Don’t be fooled. I’ve hired relatively few of these sociopaths in my career but, oh boy, did they ever make a lasting impression. One man (whom I actually didn’t hire—he was a holdover from a former owner) would make “special” deals with my customers outside of store hours and then pocket the money for himself. Another woman had such a problem with authority she would attempt to sabotage my business by badmouthing me to my customers and her coworkers. When it came time to fire her, I allowed it to devolve into a screaming match. More than a decade later, I still cringe whenever I think about that experience. I should have seen it coming. During her interview, she made a snide comment about a former employer. I brushed it off then, but I’ll never make that mistake again. Even if your pool of applicants for a position is shallow, take note of any red flags alerting you to a potential hyena and run away from these crazy-makers, far in the opposite direction.

Taming Lions

In my experience, taming a lion is a worthwhile investment in your business. Hire too many and you’re asking for trouble, but place one or two in key positions and watch your business take off! These people tend to be temperamental and may require nearly as much supervision as the monkeys on your staff (just be prepared to do more ego stroking than prodding). Keep in mind that lions are often more motivated by money, prestige and titles than your other types of employees. When I sold my frame shop to inexperienced owners, one of the women who worked for me took over as the manager. Later, she opened a shop of her own. Today, she is an extremely successful businessperson. She was definitely a lion. If you’re reading this, chances are you’re one too.

Protecting Rhinos

Like gazelles, rhinos prefer to maintain a low profile. Unlike the gazelles, they aren’t motivated by fear. Instead, these people take pride in their work and want to do their best. They’re rarely management material—they prefer not to deal with nonsense themselves—but when this person does something, they usually do it right the first time. They are thick-skinned and can take constructive criticism, but their main motivation is a job well done. However, their reliability makes them prone to overload; owners would be well advised not to lean on their rhinos too much. Like the hyena, but for the opposite reason, you should learn to spot one during the interview. And then, hire her on the spot. Once, while my business partner was interviewing someone for a position at our company, the applicant looked over and flashed me a smile so sincere I felt like I’d known her forever. I knew within 30 seconds of meeting her she would get that job. She stayed with me for years and we remain close friends today—just don’t tell her I called her a rhino.

In fact, I knew less than nothing about running a business, and I didn’t even know that. Back then, in my 20s, I dove headfirst into everything I did, arms and legs flailing. I was all heart and no homework. I thought that, with enough passion and effort, I’d learn what I needed to know along the way.

I did, eventually—but it was nearly always the hard way.

Sometimes it does pay to jump in with your eyes closed. For instance, when you’re diving out of an airplane. It took me years to learn that it’s almost never a good idea to go in blind when you’re starting a business, though.

In the beginning, you’ll be faced with dozens of new challenges every day. I always thought if I’d known what was coming, I might never have taken the leap. But there’s a big difference between being prepared and being willfully ignorant. My new motto is: “Expect the best but prepare for the worst.” (I have a lot of mottos.)

Don’t get me wrong—learning from mistakes can be valuable. But there are two ways to do it: make your own (like I did), or learn what can go wrong by studying these guys:

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CASE STUDY #1: PETS.COM

If you were around for the dotcom boom at the turn of this century, you remember the poster child of the subsequent bust. It was a sock puppet.

When the Pets.com puppet wasn’t making appearances in the company’s own commercials, it was doing interviews on television programs such as Nightline, Good Morning America and Live with Regis and Kathie Lee. The 1999 Macy’s Thanksgiving Day Parade even featured a balloon created in its image. The sock puppet’s most notable appearance was in an eyebrow-raising $1.2 million ad featured in the 2000 Superbowl.

And…the company was out of business later that year.

What Went Wrong?

Part of the problem was that the company bought into its own hype, but the bigger sin was that Pets.com’s owners—Hummer Winblad Venture Partners—ignored the fundamentals. In a move that can be described as gross negligence, Hummer Winblad didn’t bother to do any independent market research in its push for an IPO. Were there even customers for the home delivery of fake mice and rubber bones? Who cares?! And just like that, $50 million of investor money disappeared into the litter box of history.

The Takeaway: Don’t Ignore the Fundamentals

Do your market research and develop a business plan before you open your doors. Even a sock puppet knows that.

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CASE STUDY #2: EDSEL

What’s worse than not doing market research? Spending a fortune on it and then dismissing it. That’s what Ford Motor Company did when it introduced the Edsel in 1957.

During the post-war boom of the mid-1950s, Ford was worried that newly-affluent consumers were trading their old Fords in for cars from rival brands. In order to compete, the company spent millions of dollars to send its researchers into the field on a quest to develop a new mid-priced brand that would fill the gap in its own stable of cars.

But over the course of the Edsel’s three-year run, Ford only managed to unload 118,000 of them. The company lost $250 million on the debacle—a sum equal to more than $2 billion of today’s dollars.

What Went Wrong?

Well, for one thing, the name. Ford’s advertising agency—Foote, Cone & Belding—solicited its employees to suggest names for the new car, offering the winner a car of their own as the prize. Of the 18,000 names that poured in, the company whittled the list down to ten prospects. That list included future classics like Citation, Corsair, and Pacer. The finalists were presented to Ford’s executive committee in November 1956. The committee didn’t like any of them. Ford’s frustrated chairman, Ernest Breech, asked the committee out loud, “Why don’t we just call it Edsel (after the founder’s late son and former president of the company, Edsel Ford)?” It was less a question than a command. When Ford’s public relations manager, C. Gayle Warnock, got wind of the decision, he sent a one-line memo to project head Richard Krafve: “We have just lost 200,000 sales.”

The Takeaway: Don’t Disregard Your Own Market Research

Ignore your research and you’ll end up, as Time Magazine described the Edsel in 1959, resembling “an Oldsmobile sucking a lemon.”

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CASE STUDY #3: NEW COKE

Despite developing a brand that was synonymous with soda, the Coca-Cola Company decided to scrap its signature drink in 1985 and start over with a product it deemed New Coke.

By the late 1970s, Coca-Cola was losing market share to rival PepsiCo. Pepsi had overtaken its main competitor in supermarkets and was targeting Coke’s superior presence in vending machines and fast food joints. Coke’s market research showed that the problem was its flavor: customers were developing tastes for sweeter flavor and Pepsi was capitalizing on those changing tastes.

Coke’s answer was to introduce a drink that was even sweeter than Pepsi. New Coke outperformed both the original formula and Pepsi in taste tests—by a mile. A year after New Coke’s release, Coca-Cola’s sales jumped 8 percent over the previous year. But then the backlash began. Customers loyal to the brand began a vocal campaign to bring back their beloved Coke. To appease them, the company reintroduced the old formula as Coca-Cola Classic. New Coke sales nosedived as the earlier product regained its former market share and then some. New Coke was rebranded Coca-Cola II in 1992. By 2002, New Coke was dead.

What Went Wrong?

Coke underestimated the power of brand loyalty. Taste isn’t always about actual taste. That was especially true for Coke’s customers in the Southern U.S., where the company is based.

Because Coke was able to reclaim its former glory, some believed the whole New Coke fiasco was a marketing ploy. It wasn’t. The company just lucked out. Plus, Coke had hundreds of millions of dollars on hand to weather the storm. If only we could all be so lucky.

The Takeaway: Don’t Mess With a Good Thing

There are actually a couple of takeaways here. The first is: if you’re doing something well, keep doing it. The other is to not take your loyal customers for granted. If you break either of these time-tested rules, you probably won’t get as lucky as Coke did.

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CASE STUDY #4: JCPENNEY

You’ve seen it before—the business that doesn’t know what it wants to be. Is it a clothing store or a nail salon? Is it a deli or a casino? These types of business configurations rarely succeed. Customers want to know exactly what they’re getting.

So what was JCPenney thinking? For decades, JCPenney was the go-to discount clothing retailer. When you shopped at one of the company’s 1,000+ department stores, you knew what you were going to get: low prices.

But that all changed when the company hired former Apple retail boss Ron Johnson to take over as CEO in November 2011. In 2012, JCPenney’s sales were down more than 20 percent and its stock price had plummeted 30 percent. By early 2013, Johnson was out, and a century of success had been wiped out in just over a year.

What Went Wrong?

Johnson made several head-scratching changes during his mercifully short tenure, including scrapping discounts in favor of something he called “fair pricing,” changing the company’s logo for the third time in three years, and pushing for brands like Levi’s to open their own “mini-shops” inside of JCPenney locations (an idea based on the Genius Bar model in Apple Stores). Worse, he got rid of practically everyone who knew anything about clothing retailing, including 600 folks from the company’s Texas headquarters and thousands of middle managers across the country. He even fired the company’s long-time advertising agency. In the lingo of the tech industry Johnson was familiar with, everything he did was a major fail.

The Takeaway: Don’t Try to Be Something You’re Not

You’re good at something. That’s why you went into business for yourself. Just because you worked at the Genius Bar, doesn’t make you a genius. Stick with what you know.