You've now identified the things you are good at and find enjoyable/satisfying. You also wrote down your business idea in as much detail as you could. You'll now investigate how profitable this business idea could be and identify your ideal client, so that you can assess whether what you're offering is in demand.
Is My Idea Profitable?
Let's look at whether you can make a living running a business based on the idea you've already identified.
Here are some of the questions you need to ask yourself:
Is there an existing demand for products and services in your chosen business area? If so, then you know that people are already buying similar products and services, and there is a market for them.
Can you add value to the existing market? This will put you ahead of your competition and help you make sales.
Can you provide a solution in a way that has never been seen before? You may have something completely unique to offer to the world.
You will find out the answers to these questions by doing some research. This will help you determine whether your business idea stands a chance of financial success.
It doesn't matter if you offer physical products, digital products, in-person services or virtual services, or whether you want to sell them online or offline. Research is crucial no matter what business model you adopt.
Research the Existing Market
When you research what's already selling, this means you are researching your competitors.
Here are some places to start your research online:
Google and YouTube
Put your business idea into the search engine, and you'll probably find pages upon pages of results. Ignore the paid advertisements (you can usually see 'Ad' or 'Sponsored' written next to them) as you can't be sure that they are truly part of the most popular results.
Spend some time looking at the websites and videos on the first page to see what's being offered.
Type your business idea into Amazon and see how many products and books are listed. Too few listings and there may not be a viable market. Too many listings and the competition will be fierce.
Make some notes from your research - this is valuable information that you want to hang on to.
We'll return to competitors in a later post. But remember that what you've discovered is only a snapshot and gives you a guide to start you off. You'll refine this data as you start selling and build up your own figures.
Define Your Target Customer
The next step is to identify your target customers. These are the people who want and need what you have to offer. They are the people you would like to have as customers. They are probably already purchasing similar products or services from someone else.
Before you can find them and market to them, you need to define this specific audience. Do you have any idea who would be the best fit for your business idea?
A few examples of businesses with clearly defined target customers would be:
- A shopping network that targets working mums over 30
- A careers counsellor who targets men facing redundancy in the chemicals industry
- An online app store that targets teens who see themselves as 'alternative'
- A camping goods supply store that targets people in holiday areas
- A kitchen designer who targets upper middle-class cooking aficionados
Create Your Target Customer Profile
You come to your definition of an ideal customer by researching demographics such as age, gender, location, family situation, as well as psychographics such as their worldviews, values, what books they read and what dreams and desires they have for the future.
Demographics help you recognise who your audience is.
Psychographics tell you about their behavior and their "why".
Important psychographic data to collect includes your target customers' major challenges, or pain points. These will be the things that worry them, that keep them awake at night, the questions that go around and around in their heads and the problems they regularly face. Once you know this, you can offer solutions to those challenges.
There are many ways to find out this information. Go to where your ideal customers hang out on social media. Join groups on Facebook, LinkedIn, Instagram and so on (whatever is most relevant to your niche). You probably belong to some groups already.
Then ask questions:
Online surveys - Use Survey Monkey or Wufoo to create a survey and ask your target customers to complete them.
Blog questions - If you have a blog, ask questions like 'What would help you overcome this problem?' or 'What solution are you looking for?'
Online groups, Q&A sites and chatrooms - Look at what people are discussing and the questions they're asking.
Social media - Check out the trending topics on the major social media platforms relevant to your market. You can also search for topics related to your business idea and see what comes back.
Once you've gathered this information together, build a profile of one person who embodies your ideal customer.
Use the following questions to help you build up your ideal customer profile:
- Are they male or female?
- What is their age?
- What is their family background?
- What is their cultural background?
- What is their educational background?
- Where do they live and work?
- Are they married, single, living with a partner?
- Do they have children?
- How old are their children?
- Do their children live at home?
- What sort of place do they live in?
- What films and books do they like?
- What is their business or their job?
- What is their passion?
- Do they have a religious or spiritual belief? If so, what is it?
- What do they do in their spare time?
- Where are they on the corporate ladder? Where are they in their business?
- What is their income?
- What keeps them awake at night?
- What do they wish was true about their lives?
- What are their dreams?
- What else do you know about them?
Get Specific About Your Market
A common mistake for people starting a business is being too broad about their ideal customer. They think that they'll miss out on business and should be thinking more widely. For example, "I want to help women lose weight."
In fact, the opposite is often true. You may attract more people because you're specialised in what you provide and to whom. Don't be afraid to get specific.
This concept is often called 'niche marketing.'
This is a marketing approach for products or services that appeal to a narrowly defined market. It makes sense. After all, if you were in the business of selling retirement plans for the over-50s, you wouldn't want to market to people in their 20s, would you?
Let's use a few examples to illustrate this approach. The original ideas are rather vague but, through research, they can be refined down to be more specific.
Original business idea: I want to help business owners work more efficiently.
Specific niche: I want to help work-from-home moms save time in their business by introducing planning systems.
Original business idea: I want to sell beauty products.
Specific niche: I want to sell cruelty-free makeup to women over 50 who want to take care of their skin.
Original business idea: I want to introduce healthy cooking into my town.
Specific niche: I want to provide vegan street food to students in my neighborhood.
Do you get the idea? What we're talking about is narrowing your business focus and getting it to a point where you have a ready market wanting to buy.
Now that you have a clearer idea about your target customer, and you've researched the competition, take your business idea and see if you need to 'niche' down to a more specific audience.