Good market descriptions are rare. I write that as entrepreneur, consultant, and angel investor. I read more than business 100 plans, and watch 3-4 dozen business pitches, every year. Most of the market definitions I see are useless. So I really appreciate a good one. So I’m offering some tips on how to define a market right.
For example, I have a real case: HavePresence.com, a social media service one of my daughters operates. It’s market-defining story is this …
Terry loves her business, puts heart and soul into it, and is making it work. Sales are growing, customers are happy, the employees get it. Social media makes Terry nervous, though, because it feels like it’s important for growing the business, but, in Terry’s words, “who has time to run a business and mind social media too?” And that’s where Eugene Social comes comes in: we make time so Terry makes money. We don’t tell people what to do, or how to do it, because that’s really not hard. What we do is the part that is hard: we do the updates, the tweets, the retweets, the content curation, strategically and respectfully, so Terry can focus on the core of the business while the brand is building, traffic is generating, and somebody is taking the time to watch the amplified word of mouth going on in the social media.
The story defines the market several ways:
- It explains the need, or want, or, if you like jargon, the so-called “why to buy.” In this case it’s defined in part by what it isn’t: It’s not about selling knowledge, experience, and wisdom by the hour. It’s not built around a guru. Instead, it’s about doing, not knowing. It’s about getting things done in a business setting, and having time to do the right things, but not enough to do everything. It’s about time management, division of labor, and small business owners getting things done. There are millions of social media gurus, some of whom really know the territory. This story isn’t about knowing; it’s about doing. It’s about time.
- It defines the target customer. In this case it’s a defined subsegment of small business owners, specifically those who know that social media is good for business, but don’t have time to do it themselves. This too is defined in part by what it isn’t: The target market doesn’t include business owners who either do it themselves or have solutions in place. Furthermore, it doesn’t include business owners who don’t think it’s important.
- It leads to credible numbers. In this case, there are about 27 million businesses in the United States, about six million of them big enough to have employees, 21 million so small they don’t have employees, and only a million or so too big to be in this target market. From that big pie we would (if I were going into detail here) cut segments according to how many in social media, how many doing very well with it, how many just dabbling, and so forth. I’ll stop here, assuming you get the idea.
- It generates marketing messages, media, tactics, and programs.
- It communicates a market to somebody else, like to an investor, banker, partner, or employee.
Do you see what I mean by communicates? The real market isn’t some number, it’s that collection of people. Sure, the number is nice, once you know the people, but first you have to feel like these people actually exist, and the reason to buy exists, and that the people and the reason match up.
The statement “this is a $43 billion market” without a market-defining story means nothing to me. The story drills down to the nitty gritty or the number just annoys me. And I don’t think it’s just me. I’m often with groups of fellow investors, or groups of business plan competition judges, and I don’t think I’ve even met one who cares about the market number without a market-defiining story.
So, business owners, here’s your assignment: immerse yourself in your market-defining story.
And furthermore, if you’re going to be pitching to investors, make it good.
Nice, I’ve already crafted my why. Now this ^ is on my list to make the why even more tangible. I am thinking about this process as a journey to better understand my why. If I do that, I will embody that vision. Thanks for the kerosene Tim!
I really learned from reading this article. We are starting a new business and are still in the planning stage. So far there has been no market defining-story. As I read this information and processed I realized that we really have no definition of the business only dollars and cents which as you put it is truly annoying. This sends me back to the drawing board to think of things in specific terms. I must remind myself market defining-story not a cosmic tale.
[…] Tim Berry: Every Business — Yours Included — Really Needs a Market-Defining Story. Really. […]