How To Find A Great Target Market
The first step for any business.
Choosing your target market is probably one of the most important business decisions that you will ever make.
From the target market follows which problem you are going to solve, what solution you are going to offer & consequently how much profit you can potentially make.
Choose the wrong target market and you will…
… create a product that won’t sell.
… build a business that isn’t scalable.
… get flooded by competitors.
Unfortunately, most aspiring entrepreneurs get it completely wrong. A seemingly great idea for a product comes to their mind. Something exciting, ‘revolutionary’ and ground-breaking.
And that is where they start from.
The result is that most startups end up building products for which no market exist. Products that might ‘sound great’ and cause interest, but for which nobody is willing to take out their wallet and pay real money.
Something might be super ‘interesting’.
But that doesn’t mean that people are actually willing to pay for it.
The real entrepreneur starts with a target market. He or she observes people from that market, talks to them, listens to them and constantly keeps trying to figure out which problems they solve.
First, they find a real problem.
Then they figure out whether or not people are willing to pay for a solution to this problem.
And only then do they actually start thinking of a potential solution. Not a solution that sounds great and seems to revolutionize this and that. Not a solution that fulfils the ego of the entrepreneur.
ONE solution to ONE real problem faced by ONE specific target market.
Obviously, it is also not enough to simply discover a problem and then to figure out a solution to that problem. What you are going to have to figure out is whether or not solving this problem can translate into a real business.
That is, whether or not this business can be:
- scaled (i.e. how large is this target market? how many people can I potentially sell this to at what price point?)
- automated (i.e. can this business be automated to the degree that it won’t require my active involvement?)
- made profitable (i.e. considering the costs of this business, how much profit could I potentially make at the end of the month?)
Choose a few seemingly interesting target markets.
At this point you don’t need to think too much yet about what exactly it is you are trying to do. All you need to do is to simply come up with a few target markets that could potentially be interesting for you.
Maybe you already know these markets quite well.
Maybe these markets are growing trends.
Maybe these markets have a ton of unsolved problems.
This is really mostly a brainstorming stage. You are mostly doing some of your own thinking and doing some online-research. Tools like Google Trends or any others that can tell you something about what people are thinking about can be helpful here.
Great places to start:
- Which communities are you yourself part of? Are you an architect? Are you a cat owner? Are you a digital nomad? Starting from communities that you are a part of is always a great option, because you already have an inherent understanding of its members.
- What are some new trends coming up? For example, veganism is in extreme growth since the last fear years. They are an extremely passionate group of consumers and will need different kinds of solutions (e.g. vegan restaurants, guidebooks on vegan lifestyle, vegan food products etc.).
- What are some ‘demonstrated cashflows’ that you can tap into? Andy Black writes that a market is a demonstrated cashflow. This means that if you want to discover a market, you need to go to the places where money is already flowing. Find places where money is already flowing, and you find a potential target market.
- What problems are you yourself facing and which groups of people might face the same problems? Sometimes, we are facing problems that many other people are facing, too. If you can identify those problems and people are willing to pay for a solution, then that’s a way to go.
Discover problems that they are facing.
This is the point where you need to listen to your target market. You need to observe their behaviour. Talk to them. Conduct surveys. Notice things that they are talking about.
In short, you need to understand them better and better.
Essentially, you are conducting ‘informal’ market research. Not something like focus-group discussions or whatever, but something that can give you a good overview about who these peoples are and what problems they are facing.
Great places to start:
- Online Forums/Facebook groups: join a group for a while where people from your target market are gathering. Listen to their conversations. Ask questions. Observe complaints that they have. Anything that can tell you something about the problems they are facing, really.
- Meetup/networking groups: In the best case scenario, you will be able to attend a few live events where people from your target market gather. You can ask them directly about their main industry problems and so on and so forth
- Cold e-mailing/cold calling: You can invite people to fill out your survey (ask open-ended questions) or you can cold call people and simply ask them to tell you a bit more about their industry. You might not get a lot of responses, but if you do then they are often extremely useful.
Think through questions of feasibility.
Once you have identified a few potential target markets and got a sense of the kind of problems they are solving, the things to think through now are all about the feasibility of the project.
You will have to ask yourself questions like:
- Can I realistically provide a solution to this problem? Do I have the resources for that?
- What would a solution to this problem look like?
- How much are customers willing to pay for a solution of this problem? Is this going to be financially worthwhile?
- How many of these products do I need to sell in order to create sufficient cashflow for my business? Is this realistically achievable?
- How much time I will have to spend to set up this project and what are the potential outcomes?
- Which aspects of this potential business can I automate and which one’s can I not? Will it be worth my time investment?
There are a lot of things to think about before starting a new endeavor. What you desperately need to avoid is that you are setting up a business that (1) doesn’t create enough money (2) sucks up way too much of your time and (3) simply isn’t scalable.
Just because you found a great target market and you know that you can provide a great solution for one of their problems, doesn’t mean that you should do so (i.e. that it’s financially worthwhile for you).
Don’t rush into this process.
Make sure that you identify a market and a solution with the potential to be financially profitable for you.
Identifying the right target market is the most important thing that you can do for your business. It is only once you know who exactly your target customers are, that you can provide a valuable solution to their problems.
Don’t just come up with something out of nowhere.
Do your research. Ask your target customers. Build something that they not only need, but that they are willing to pay for.
Make sure that you validate the fact that they are willing to pay for your particular solution. And how much they are willing to pay.
The stage of figuring out who your target customers are is not complete until you haven’t at least found a few paying customers. It is not for them to tell you that they will pay (once your solution is available).
As long as your target customers haven’t already paid you real money, you are still making assumptions.
Don’t be that poor fellow who builds something that nobody wants.
Do your research. And do it right.