Question: I am working on my business plan and I need target market information and demographics. Since my business is quite unique (a holistic health center) I am not sure how to find the information that I need to feel in this part of the business plan.
Answer: It’s easier than you think.
First, refocus the goal. It isn’t a test. There isn’t some exact right answer hidden somewhere, making all other answers wrong. What you want, for a business plan, is a sense of market. You want to know who needs this, who’s going to buy from you, why, and how many of them are there. What message do you send them? Where do you reach them?
So let’s make this specific for your case:
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Start with general information about your local area. You can get it at www.census.gov and at the local chamber of commerce and at the advertising department of the local newspaper or any local magazines. The advertisers call it a media kit, by the way, so ask them for a media kit and if they ask them why, tell them the truth — you’re doing market research. What you want is how many people, genders, families, age groups, and income groups.
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Figure out a way to quantify a target group of most likely buyers. Call that group a market segment. It’s hard to guess from your email what exactly a holistic health center means, but you’ll know whether your most likely buyer is wealthy or not, older or not, and local or not. Pull the specific group information out of your larger demographic information.
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Find a way to verify that your most likely buyers are good prospects. The following are just suggestions, do one or two, not all.
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One thing you could do is explore businesses offering similar or competing products or services, see how many there are, and how well they are doing. For just one hypothetical example, suppose a holistic health center offers deep-tissue massage. If that’s the case, then you’d want to know how many deep-tissue massage offerings there are in the local area, and how has that number changed over time. One simple thing to do is count advertisements in the yellow pages.
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Park outside a competing business and count its customers for an hour or two at a few different times of the day or week.
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Interview 10 people who are in the most likely prospect group, ask them what they want and why, what they now buy, how much they need the service.
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It should help you a lot to realize that knowing your market is about making sure that you’re guessing correctly, that there is a need, and likely buyers, and people will spend money. You’re trying to reduce risk. It’s basically the question “if you build it, will they come?” This isn’t like a treasure hunt in which there is some theoretical right answer or perfect information hidden somewhere and you get a prize if you find it.
Don’t fuss over how your problem is unique. Everybody’s business is unique. Thank God that it’s unique, because if it weren’t, you’d be looking at a much tougher problem. Everybody has the same problem. We all need to know our specific markets in our specific business area, local or not, and our strategies make our markets specific.
This uniqueness also means that you are trying to make a good educated guess. Sometimes that helps people understand that there is no specific right answer or hidden treasure. You want to make good guesses because your business is at stake.
Now, having said all the above, there are also free resources available that can give you a lot more detail and granularity than this specific email. Read the “Know Your Market” chapter of the Hurdle book, which you might have already and if not you can get it at PaloAlto.com or at amazon.com or read the free version — just as complete, and more updated — at www.hurdlebook.com.
— Tim
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
