Authors: Inc The Staff of Entrepreneur Media

Start Your Own Business (13 page)

BOOK: Start Your Own Business

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Whenever possible, follow the same steps you would for investigating a franchise. Check out
Entrepreneur
magazine’s BizOpp Zone (
entrepreneur.com/bizopp
). Contact the Better Business Bureau to see if there have been complaints against the company, and if the company is registered with D&B, a financial report will give you details on its financial standing and other information.

Also check with the regulatory agency—either the Commission of Securities or the Commission of Financial Institutions—in the state where the business opportunity has its headquarters. This will tell you if the company is complying with all state regulations. If you discover the company or its principals have been involved in lawsuits or bankruptcies, try to find out more details. Did the suits involve fraud or violations of regulatory laws? A copy of the petition or judgment, which you can get from the court that handled the case, will give you the answers to these questions.

WARNING

Watch out for promises from third-party location hunters. The sales rep may say, “We’ll place those pistachio dispensers in prime locations in your town,” but more likely, you’ll find out that all the best locations are taken, and the next thing you know, your garage is filled with pistachio dispensers. The solution: Get in your car, and check for available locations.

Finally, see if the business opportunity seller will provide you with a list of people who have purchased the opportunity in the past. Don’t let the seller give you a few handpicked names; ask for a full list of buyers in your state. Try to track them down, and talk to as many as you can. Were they satisfied with the opportunity? Would they recommend it to friends?

The path to buying a business opportunity is not as clearly defined as the road leading to franchise ownership. The good news, however, is that you have more freedom to make your business opportunity work. More so than with a franchise, the success or failure of your business opportunity depends on you, your commitment to the venture and the level of effort you put into it. Put that same effort into finding the right business opportunity program, and your chances of success increase exponentially.

part 2

PLAN

chapter 6

CHOOSE YOUR TARGET

Defining Your Market

Y
ou’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 individual consumers.

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 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 & 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 sevenstep 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 75). 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.
DIRECT HIT

O
nce 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. 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. Fiftyfive-year-old baby boomers prefer rock ’n’ roll to Geritol; 30-year-olds may still be living with their parents. People now repeat stages and recycle their lives. You can have two men who are 64 years old, and one is retired and driving around in a Winnebago, and the other is just remarried with a toddler in his house.

Generational marketing, which defines consumers not just by age, but also by social, economic, demographic and psychological factors, has been used since the early ’80s 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.

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.

WARNING

Marketing to ethnic consumers? Don’t make these mistakes: Sticking ethnic faces in the background of your marketing materials, “lumping” (for example, treating Japanese, Chinese and Korean Americans as one big mass of “Asians”), or relying on stereotypes such as slang or overtly ethnic approaches. Subtlety and sensitivity are keys to success when approaching these markets.

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.
Target Market Worksheet

Use the following exercise to identify where and who your target market is. Once you’re done, you’ll have an audience to aim for and hone in on rather than using a shotgun approach, which is a time- and money-waster.
1. Describe the idea:

2. What will the concept be used for?
3. Where are similar concepts used and sold?
4. What places do my prospects go to for recreation?
5. Where do my prospects go for education?
6. Where do my prospects do their shopping?
7. What types of newspapers, magazines and newsletters do my prospects read?
8. What TV and radio stations do my prospects watch and listen to?