When you are still in the planning stages of your business, testing your market potential is an important step to take. Simply put, you can’t rely solely on cash to keep your business going—you also have to understand your market. Knowing this is a major step in understanding what it will take for your business to succeed.
These 3 steps can help you determine your own market potential:
1. Define your market
For most small businesses, your market is a specific area or region; for example, a shopping district that serves a residential neighbourhood. But not all markets fit into a neat and tidy square on a map. Online-based businesses may find their market exists in many different locations. It’s important to narrow your market area down to the most specific space you can, even if that space includes a few different regions.
Say you’re opening a shoe store in Vancouver. There’s a million people in Vancouver and everyone wears shoes, right? That doesn’t mean your market area is the entire city. Zoom in on a geographically serviceable area that’s realistic for your business, and then think about who your consumers really are.
2. Describe your perfect customer
Now it’s time to think about exactly who your business is selling to. Make a list of everything you know about your perfect customer (such as age, gender, lifestyle, etc). Think about who will benefit or be interested in your products or services.
Once you know who your ideal customer is, find statistics that tell you how many people who fit that description live in your market area. Small Business BC is a great resource to help you with this.
3. Talk to your perfect customers
Set up an online survey, put together a focus group, or just get chatty with a few people who fit into your perfect customer description. Give them your 30-second business pitch and fire a few questions at them such as:
What would make them buy your product or service?
How much would they be willing to pay and how often would they buy?
What deal breakers would keep them from using your product or service?
Once you have their answers, take some time to think through any issues or common themes that popped up.
Looking for more information to help you complete your business plan? Click here for some help and to find out when the next Each One, Grow One small business workshop is happening. They’re free for Vancity members and non-members, and are a great starting place to create your perfect business plan.
This is the last post in a series of advice articles for local entrepreneurs to celebrate Small Business Month. To read another post, click here.