You’ve come up with a great idea for a business . . . but you’re not ready to roll yet. Before you go any further, the next step is figuring out who your market is.
There are two basic markets you can sell to: consumer and business. These divisions are fairly obvious. For example, if you are selling women’s clothing from a retail store, your target market is consumers; if you are selling office supplies, your target market is businesses (this is referred to as “B2B” sales). In some cases—for example, if you run a printing business—you may be marketing to both businesses and individuals.
No business—particularly a small one—can be all things to all people. The more narrowly you can define your target market, the better. This process is known as creating a niche and is key to success for even the biggest companies. Walmart and Tiffany are both retailers, but they have very different niches: Walmart caters to bargain-minded shoppers, while Tiffany appeals to upscale jewelry consumers.
warning
Even though many baby boomers are now well over 50, don’t make the mistake of marketing to them the same way you would to seniors. Boomers don’t think of themselves as “old” or “seniors.” The moral? The same marketing approaches that appealed to boomers when they were 30 will appeal to them when they’re 50, 60, and 70.
“Many people talk about ‘finding’ a niche as if it were something under a rock or at the end of the rainbow, ready-made. That is nonsense,” says Lynda Falkenstein, author of Nichecraft: Using Your Specialness to Focus Your Business, Corner Your Market and Make Customers Seek You Out. Good niches do not just fall into your lap; they must be very carefully crafted.
Rather than creating a niche, many entrepreneurs make the mistake of falling into the “all over the map” trap, claiming they can do many things and be good at all of them. These people quickly learn a tough lesson, Falkenstein warns: “Smaller is bigger in business, and smaller is not all over the map; it’s highly focused.”
Practicing Nichecraft
Creating a good niche, advises Falkenstein, involves following a seven-step process:
1. Make a wish list. With whom do you want to do business? Be as specific as you can: Identify the geographic range and the types of businesses or customers you want your business to target. If you don’t know whom you want to do business with, you can’t make contact. “You must recognize that you can’t do business with everybody,” cautions Falkenstein. Otherwise, you risk exhausting yourself and confusing your customers.
These days, the trend is toward smaller niches (see “Direct Hit” on page 71). Targeting teenagers isn’t specific enough; targeting male, African American teenagers with family incomes of $40,000 and up is. Aiming at companies that sell software is too broad; aiming at Northern California-based companies that provide internet software sales and training and have sales of $15 million or more is a better goal.
2. Focus. Clarify what you want to sell, remembering: a) You can’t be all things to all people and b) “smaller is bigger.” Your niche is not the same as the field in which you work. For example, a retail clothing business is not a niche but a field. A more specific niche may be “maternity clothes for executive women.”
To begin this focusing process, Falkenstein suggests using these techniques to help you:
Make a list of things you do best and the skills implicit in each of them.
List your achievements.
Identify the most important lessons you have learned in life.
Look for patterns that reveal your style or approach to resolving problems.
Your niche should arise naturally from your interests and experience. For example, if you spent ten years working in a consulting firm, but also spent ten years working for a small, family-owned business, you may decide to start a consulting business that specializes in small, family-owned companies.
3. Describe the customer’s worldview. A successful business uses what Falkenstein calls the Platinum Rule: “Do unto others as they would do unto themselves.” When you look at the world from your prospective customers’ perspective, you can identify their needs or wants. The best way to do this is to talk to prospective customers and identify their main concerns. (Chapter 7 will give you more ideas on ways to get inside customers’ heads.)
4. Synthesize. At this stage, your niche should begin to take shape as your ideas and the client’s needs and wants coalesce to create something new. A good niche has five qualities:
It takes you where you want to go—in other words, it conforms to your long-term vision.
Somebody else wants it—namely, customers.
It’s carefully planned.
It’s one-of-a-kind, the “only game in town.”
It evolves, allowing you to develop different profit centers and still retain the core business, thus ensuring long-term success.
5. Evaluate. Now it’s time to evaluate your proposed product or service against the five criteria in Step 4. Perhaps you’ll find that the niche you had in mind requires more business travel than you’re ready for. That means it doesn’t fulfill one of the above criteria—it won’t take you where you want to go. So scrap it, and move on to the next idea.
6. Test. Once you have a match between niche and product, test-market it. “Give people an opportunity to buy your product or service—not just theoretically but actually putting it out there,” suggests Falkenstein. This can be done by offering samples, such as a free miniseminar or a sample copy of your newsletter. The test shouldn’t cost you a lot of money: “If you spend huge amounts of money on the initial market test, you are probably doing it wrong,” she says.
7. Go for it! It’s time to implement your idea. For many entrepreneurs, this is the most difficult stage. But fear not: If you did your homework, entering the market will be a calculated risk, not just a gamble.
Direct Hit
Once upon a time, business owners thought it was enough to market their products or services to “18-to-49-year-olds.” Those days are things of the past. According to trend experts, the consumer marketplace has become so differentiated, it’s a misconception to talk about the marketplace in any kind of general, grand way. You can market to socioeconomic status or to gender or to region or to lifestyle or to technological sophistication. You can market to Millennials, a generation that shops and buys goods and services in vastly different ways than their older siblings and parents. There’s no end to the number of different ways you can slice the pie.
Further complicating matters, age no longer means what it used to. Fifty-five-year-old baby boomers prefer rock ’n’ roll to supper clubs; 30-year-olds may still be living with their parents. People now repeat stages and recycle their lives. Generational marketing, which defines consumers not just by age, but also by social, economic, demographic, and psychological factors, has been used since the early 1980s to give a more accurate picture of the target consumer.
A more recent twist is cohort marketing, which studies groups of people who underwent the same experiences during their formative years. This leads them to form a bond and behave differently from people in different cohorts, even when they are similar in age. For instance, people who were young adults in the Depression era behave differently from people who came of age during World War II, even though they are close in age.
To get an even narrower reading, some entrepreneurs combine cohort or generational marketing with life stages, or what people are doing at a certain time in life (getting married, having children, retiring), and physiographics, or physical conditions related to age (nearsightedness, arthritis, menopause).
Today’s consumers are more marketing-savvy than ever before and don’t like to be “lumped” with others—so be sure you understand your niche. While pinpointing your market so narrowly takes a little extra effort, entrepreneurs who aim at a smaller target are far more likely to make a direct hit.
“If you work just for the money, you’ll never make it, but if you love what you’re doing and you always put the customer first, success will be yours.”
—RAY KROC, FOUNDER OF MCDONALD’S CORPORATION
Keep It Fresh
Once your niche is established and well-received by your market, you may be tempted to rest on your laurels. Not a good idea, says Falkenstein. “[You must] keep growing by re-niching. This doesn’t mean totally changing your focus, but rather further adapting it to the environment around you.”
Figure 6.1. Target Market Worksheet
Ask yourself the following questions when you think you have found your niche—and ask them again every six months or so to make sure your niche is still on target:
Who are your target clients?
Who aren’t your target clients?
Do you refuse certain kinds of business if it falls outside your niche?
What do clients think you stand for?
Is your niche in a constant state of evolution?
Does your niche offer what prospective customers want?
Do you have a plan and delivery system that effectively conveys the need for your niche to the right market?
Can you confidently predict the life cycle of your niche?
How can your niche be expanded into a variety of products or services that act as profit centers?
Do you have a sense of passion and focused energy with respect to your niche?
Does your niche feel comfortable and natural?
How will pursuing your niche contribute to achieving the goals you have set for your business?
According to Falkenstein, “Creating a niche is the difference between being in business and not being in business. It’s the difference between surviving and thriving, between simply liking what you do and the joy of success.”
On a Mission
Once you have designed a niche for your business, you’re ready to create a mission statement. A key tool that can be as important as your business plan, a mission statement captures, in a few succinct sentences, the essence of your business’s goals and the philosophies underlying them. Equally important, the mission statement signals what your business is all about to your customers, employees, suppliers, and the community.
The mission statement reflects every facet of your business: the range and nature of the products you offer, pricing, quality, service, marketplace position, growth potential, use of technology, and your relationships with your customers, employees, suppliers, competitors, and the community.
“Mission statements help clarify what business you are in, your goals and your objectives,” says Rhonda Abrams, author of The Successful Business Plan: Secrets and Strategies.
Your mission statement should reflect your business’s special niche. Studying other companies’ statements can fuel your creativity. One sample mission statement Abrams developed:
AAA Inc. is a spunky, imaginative food products and service company aimed at offering high-quality, moderately priced, occasionally unusual foods using only natural ingredients. We view ourselves as partners with our customers, our employees, our community, and our environment. We aim to become a regionally recognized brand name, capitalizing on the sustained interest in Southwestern and Mexican food. Our goal is moderate growth, annual profitability, and maintaining our sense of humor.
Or consider the statement one entrepreneur developed for her consulting business: “ABC Enterprises is a company devoted to developing human potential. Our mission is to help people create innovative solutions and make informed choices to improve their lives. We motivate and encourage others to achieve personal and professional fulfillment. Our motto is: Together, we believe that the best in each of us enriches all of us.”
tip
Doing business with the government can seem intimidating because of all the paperwork. To make it easier, many government agencies are reaching out to teach small firms how to bid—and win. Every state provides some kind of training, usually sponsored through community colleges for a small fee. Check with your local community college or SBA district office for details.
The Write Words
To come up with a statement that encompasses all the major elements of your business, start with the right questions. Business plan consultants say the most important question is, “What business are you in?” Since you have already gone through the steps of creating your niche, answering this question should be easy for you.
Profiting from Procurement
Looking for a niche? One market many entrepreneurs ignore is the lucrative procurement pie. Although the federal government is by far the biggest customer in this arena, local governments, colleges and universities, school districts, nonprofit organizations, public utilities, and corporations also have plenty of procurement opportunities available. The federal government’s civilian agencies alone buy products in more than 4,000 categories, ranging from air brakes to zippers.
Small businesses often have an edge in competing for procurement dollars. Government agencies and large contractors are often required by law to give a certain amount of business to small, disadvantaged, women-owned or minority-owned businesses.
How to Get Started
Check out the SBA’s subcontracting opportunities at web.sba.gov/subnet.
Agencies like the U.S. Postal Service, Department of Interior, and the Army, as well as many others, send out solicitations to businesses that are on their mailing lists. To find out how to get on the lists, contact the agency you’re interested in.
Regularly check “Federal Business Opportunities” online for daily updates (fedbizopps.gov). At any given time, there can be more than 25,000 opportunities listed.
If you are a woman or a member of a minority group, you will need to be certified as a woman- or minority-owned business to work with government agencies and many large contractors. This can be done in several ways. Many cities have their own certification programs or can direct you to the certification programs that they accept. A good general place to start is with the SBA; you can reach them at 409 Third St. SW, Washington, DC 20416, or call (800) U-ASK-SBA or answerdesk@sba.gov. There is also a website devoted to helping women-owned small businesses navigate certification and procurement opportunities: www.sba.gov/content/contracting-opportunities-women-owned-small-businesses. And for minority businesses: www.sba.gov/content/minority-owned-businesses.
Answering the following ten questions will help you to create a verbal picture of your business’s mission:
1. Why are you in business? What do you want for yourself, your family, and your customers?
Think about the spark that ignited your decision to start a business. What will keep it burning?
2. Who are your customers? What can you do for them that will enrich their lives and contribute to their success—now and in the future?
3. What image of your business do you want to convey? Customers, suppliers, employees, and the public will all have perceptions of your company. How will you create the desired picture?
4. What is the nature of your products and services? What factors determine pricing and quality? Consider how these relate to the reasons for your business’s existence. How will all this change over time?
5. What level of service do you provide? Most companies believe they offer “the best service available,” but do your customers agree? Don’t be vague; define what makes your service so extraordinary.
6. What roles do you and your employees play? Wise captains develop a leadership style that organizes, challenges, and recognizes employees.
7. What kind of relationships will you maintain with suppliers? Every business is in partnership with its suppliers. When you succeed, so do they.
8. How do you differ from competitors? Many entrepreneurs forget they are pursuing the same dollars as their competitors. What do you do better, cheaper, or faster than competitors? How can you use competitors’ weaknesses to your advantage?
9. How will you use technology, capital, processes, products, and services to reach your goals? A description of your strategy will keep your energies focused on your goals.
10. What underlying philosophies or values guided your responses to the previous questions? Some businesses choose to list these separately. Writing them down clarifies the “why” behind your mission.
tip
When it comes to mission statements, employees are number one. It’s more important to communicate your mission statement to employees than to your customers. The most effective mission statements are developed strictly for internal communication and discussion. In other words, your mission statement doesn’t have to be clever or catchy—just accurate.
Putting It All Together
Crafting a mission statement requires time, thought, and planning. However, the effort is well worth it. In fact, most startup entrepreneurs discover that the process of crafting the mission statement is as beneficial as the final statement itself. Going through the process will help you solidify the reasons for what you are doing and clarify the motivations behind your business.
Here are some tips to make your mission statement the best it can be:
Involve those connected to your business. Even if you are a sole proprietor, it helps to get at least one other person’s ideas for your mission statement. Other people can help you see strengths, weaknesses, and voids you might miss. If you have no partners or investors to include, consider knowledgeable family members and close friends, employees, or accountants. Choose supportive people who truly want you to succeed.
Set aside several hours—a full day, if possible—to work on your statement. Mission statements are short—typically more than one sentence but rarely exceeding a page. Still, writing one is not a short process. It takes time to come up with language that simultaneously describes an organization’s heart and soul and serves as an inspirational beacon to everyone involved in the business. Large corporations often spend an entire weekend crafting a statement.
Plan a date. Set aside time to meet with the people who’ll be helping you. Write a list of topics to discuss or think about. Find a quiet, comfortable place away from phones and interruptions.
Be prepared. If you have several people involved, be equipped with refreshments, extra lists of topics, paper, and pencils. Explain the meaning and purpose of a mission statement before you begin—not everyone will automatically know what they’re all about.
Brainstorm. Consider every idea, no matter how silly it sounds. Stimulate ideas by looking at sample mission statements and thinking about or discussing the ten questions starting on page 77 (“The Write Words”). If you’re working with a group, use a flip chart to record responses so everyone can see them. Once you’ve finished brainstorming, ask everyone to write individual mission statements for your business. Read the statements, select the best pieces, and fit them together.
Use “radiant words.” Once you have the basic idea in writing, polish the language of your mission statement. “Every word counts,” says Abrams. The statement should create dynamic mental visuals and inspire action. Use offbeat, colorful verbs and adjectives to spice up your statement. Don’t hesitate to drop in words like “kaleidoscope,” “sizzle,” “cheer,” “outrageous,” and “marvel” to add zest. If you want customers to “boast” about your goods and services, say so—along with the reasons why.
tip
Once you’ve drafted your mission statement, you should periodically review and possibly revise it to make sure it accurately reflects your goals as your company and the business and economic climates evolve. To do this, simply ask yourself if the statement still correctly describes what you’re doing.
Once your mission statement is complete, start spreading the word! You need to convey your mission statement to others inside and outside the business to tell everyone you know where you are going and why. Post it in your office, where you, employees, and visitors can see it every day. Print it on company materials, such as your brochures and your business plan, or even on the back of your business cards.
When you’re launching a new business, you can’t afford to lose sight of your objectives. By always keeping your mission statement in front of you, you’ll keep your goals in mind—and ensure smooth sailing.