In the Heart of the Plan section we discussed knowing your market. Proving your market goes beyond knowing it. This is for when you need to show your business to outsiders, whether that’s for investors, a business plan contest, a bank, partners, potential partners. Sometimes you need to talk about your market to close friends, team members. Sometimes it’s a matter of really taking that fresh look we discussed in the Heart of the Plan.

There are no simple rules for what factors actually work to prove a market. Like so many things with business planning, it’s going to be different for every different business.

What I can tell you though, is things I’ve seen in business plans that worked.

  1. Get some credible numbers. How many buyers are out there like your ideal target customer? A lot of times you do this with census numbers, or trade data. Given the state of the web these days, it’s not too hard to find general census data (at www.census.gov) on people in the U.S. by county, age, gender, economic status, employment, and so on. It’s also not hard to find the numbers of types of businesses in your county. The blog addition to this book has a generally up to date listing of good market research links to get you started. We have more on getting market numbers in the following pages.
  2. Develop a credible segmentation scheme. We have more on that in a few pages.
  3. Cut and create. Innovate with segmentation, with market needs and wants. Come up with a new view of the market, or an interesting and creative view of a new market. What does that mean? It’s hard to lay down definitions of creativity, but sometimes people discover new markets. A few years ago, for example, people concerned with fair trade in coffee were a new market that somebody discovered. that was a matter of segmenting. Once the definitions were laid down, the market was convincing. That can be a new spin on the product, the pricing, the delivery method, or whatever. It’s up to you.
  4. Show how distribution will work. These days the most common and obvious distribution is based on the web. You’re going to take orders, and deliver information on line, or products via physical shipping, or some other variation on direct. But that’s to ignore business that runs through channels of distribution. That’s a huge portion of commerce. Channels are full of gatekeepers and standard margins and commissions and percentages. Your market isn’t proven if it doesn’t include distribution.
  5. Demonstrate sales. The key question here is whether or not people will buy what you’re selling. There’s nothing better than actual sales. No market research is more credible. Here are our initial sales. We were able to sell this many units in this much time to that many buyers.

Think about sources. Brand names are credible. Third-party buyers, channel gatekeepers, and well-known experts are credible. Your brother in law, or partner, or next-door neighbor or advisor isn’t as credible. Quotes are great. When you can find an expert, a known market research brand, or a magazine going on record about growth in your market, or the need for what you’re selling, use that. Highlight it in summaries and presentations.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.