As you launch your new business, you would do well to follow the practices of expert target-shooters. A business start-up can be a hit-or-miss affair. As any good marksman will attest, you stand a better chance of scoring a bull's-eye when you take aim before you fire. Blindly launching a business without first carefully defining your target market is like shooting with your eyes closed: You may score a hit if you're lucky, but the odds are against you.
Differentiating your product or service in a highly competitive environment is crucial. But before you can differentiate, you need to identify exactly what niche you'll serve. Will you operate an all-purpose bakery or one that caters to the health crowd with whole-grain products? Should you target the entire small-appliance repair market or focus solely on fixing vacuum cleaners?
Knowing who your market is--and who it isn't--helps you maintain a constant focus. Think like Goldilocks: The market you choose should be just right for your business--not too big, not too small.
"Define your niche too narrowly, and you may not have enough market to make a profit," cautions Janet Attard, a small-business consultant and author of The Home Office Small Business Answer Book (Henry Holt & Co., $19.95, 800-288-2131). Defining your market too broadly is just as risky. "Many small businesses have gone under trying to be all things to all customers," says Attard.
Start by assessing existing markets. If you plan to provide a unique service or product, you may be able to consider a broad market base. But if you're planning to enter a market with established competitors, look for an underserved niche. For example, if you intend to open a bakery, perhaps there are specialty markets begging to be served: the health-conscious or your local Hispanic community. Always follow your observations up with sound research to ensure a profitable market niche really exists.
Kathy Steligo is a freelance writer in San Carlos, California.