End Goal: Determining the market for your product or service #
In this step, you want to define your market as much as possible and determine whether your business has enough customers to make it. It is possible to build a business with a small number of customers or even just one large company, but it is important to know exactly what you are dealing with so that you can better determine your figures later on.
“Who is my target customer?”
Demographic: #
What is my ideal customer? Age, gender, niche groups, and certain businesses are just a few areas to consider. Define who your target customers are. Rarely do you have a product that will be purchased by the entire population, so you want to determine your ideal customer. What do they look like and who are they as a person? If you are a business to business (b2b) company, then what is the ideal company that will use your service?
Geographic: #
What area will your product or service be available? If online, it may be the whole world. If you are a local service business it may only be your general area. It is completely fine to target a small geographic location with your business, it will just inform later decisions.
Market Size: #
You should be able to estimate how many people and businesses are in your demographic and within your geographic area. This will give you a good market size, also called a Total Addressable Market (TAM). These are the people you will advertise to and hopefully gain as customers.
Do not fall into a common trap. Frequently, when people pitch business plans they will share the market size of their industry and then assume they can carve a small piece unrealistically.
“The market size is $100 billion and if we only get 2% of that market we will be rich.” They might say.
This is a naive way to look at things. Do not fall into this trap as it is not realistic. Just because a market is big does not mean you will actually get any noticeable share. Keep your thoughts grounded in reality. Investors don’t care about the % of the market you will get. What they want to hear is tangibles.
“We will sell 100,000 units”
or
“We will be able to close a deal with 10 businesses in the area”
are much better angles to approach expectations.
That is what matters.
Supply Vs. Demand: #
Likely you have heard the term before, but it is valuable to understand. Scarcity equates to value. If you offer a product or service that is in high demand, but not enough to go around then you are off to a good start. Just because there is a large supply does not mean that you cannot compete though. Remember the competitive advantages you already worked on in step one. On the other hand, just because there is demand for a product does not guarantee success.
For the purposes here though, you do not need to be an economic expert. You just need to think about whether there really is a demand for the product or service.. Think back to step one; does my product solve a problem, and whether there is an excess supply?
Competitors: #
Another part of our market research is going to be researching competitors. Remember, the world has been turning for thousands of years without your product or service, and if your business never exists it will keep on turning. So, someone out there is already providing either the exact product you have or a similar product. Ask, what are they using and why?
When talking about competitors there are two categories – Direct and Indirect. Direct competitors are those offering extremely similar or exactly the same thing as you. Indirect competitors are offering a product or service that is used in place of your product.
Example: A tax preparation company has many direct competitors. Within a stone’s throw of one office are two other tax preparation companies. These would be direct competitors. For personal tax preparation, the indirect competitors would be online tax software like H&R Block or TurboTax. The do-it-yourself programs are completely different from what the first company offers, but give the same result.
You need to know how many competitors you have here in your demographic and geographic info.
SWOT Analysis: #
This is a basic framework to evaluate a company’s position within a market place. This should be done for both the business and the owner/entrepreneur.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats
Strengths – What is your Competitive Advantage as a company?
Weaknesses – What will your company lack that your competitors won’t?
Opportunities – What trends or outside factors might help you company and what are some possibilities for the future?
Threats – What could ruin your business? Large competitors stomping you out, new technologies, regulatory concerns?
| Turtle Co. LLC SWOT Analysis | |||
| Strengths | Weaknesses | Opportunities | Threats |
| We will be the only business selling Turtlesmith branded products. We have a built in customer base as we gain viewership. The products we sell should increase viewership and engagement which is good synergy. | Customers have a vast number of options. Low viewership to the podcast would mean we wouldn’t recoup any of our upfront costs and likely operate as a loss overall. This business is really co-dependent of another business. One must succeed for the other to and therefore increases the overall risk. | If we build the infrastructure to supply our own branded products we could very easily offer it to the mass market. This business is very scalable if the initial products do even just mediocre sales. | Low engagement with website and low viewership will mean no sales. Many copycats and thieves in both the t-shirt and stuffed animal space. We could easily get ripped off from overseas manufacturing. |
| Turtle Co. LLC Owner SWOT Analysis | |||
| Strengths | Weaknesses | Opportunities | Threats |
| Experience running businesses, tax management and accounting, dealing with vendors, suppliers and customers, and manufacturing experience both domestic and overseas. | Not much experience in the T-Shirt or Stuffed animal space. Limited design capabilities which will have to be farmed out. | Expansion to other businesses if this goes well. Scott and John have good complimentary skillsets which would work in multiple spaces. | Burnout is a major threat as both John and Scott run other businesses. Personality conflicts between partners. |
Just like in the previous step, reaching out for help through discord channels, reddit subs, etc. will all be valuable.
