Am I an Entrepreneur, Blog Series 3 of 3
Recognizing the Opportunity
This is the third of three articles on starting a business: Could I? Should I? Would I?
We first started by talking about you as an entrepreneur. You are the one who will take the idea, find the customer, build the processes, test and retest, find the money, keep the customer, manage the activities and carry the business on your back. So, it makes sense that we started with you, the entrepreneur.
In the second article, we talked about ideas and where to find them. We used to teach students of entrepreneurship, in colleges around the country, to take an idea and write a business plan, then go out and find money.
We learned that way leads to failure. Why?
Because we never emphasized the importance of the customer. That was really setting the entrepreneur up for failure, because the customer is the catalyst for you in business in the first place. Now we teach you to start with the customer in mind and for you to identify who has a problem you may be able to solve, and consequently how you can make money in solving this particular problem for this particular kind of customer.
Let’s talk about how you get from idea to opportunity. Notice I didn’t say from idea to business. You have a long way before you can jump into the business. You have a lot of questions to answer first.
The most important question to answer is whether your service or business addresses an opportunity in the market and how big that opportunity is. Remember, you must make money and your customers will help you succeed, only if you are giving them something they need.
How do we know if this is truly an opportunity or just a problem that needs a solution but doesn’t affect enough people willing to PAY you for the solution? This is the key. A problem must create a need for enough people willing to pay you to make their problem go away.
I suggest you do a preliminary feasibility test on your opportunity/idea and whether or not you are the right person to deliver this solution. Before we even talk about the customer segment you are interested in working with, let’s stop and give you amble time to answer the following questions. Don’t just think about the answers, write them down. Articulate in detail your responses.
- Describe the opportunity and why you think it is a new opportunity?
- Describe your competencies and skills in order to execute on this opportunity?
- What important stakeholders will you need in order to be successful?
- Why is this a good opportunity for you?
Don’t rush through these questions. And be as thorough as you can.
How do you determine who that customer is and whether that customer is part of a large enough segment of the population that you can make you money?
Target Market Segment
Let’s look at the market and understand how to go about determining if the problem you are solving for certain customers is widespread across that customer base. The value of your service to customers is the driver of your business. In other words, your solution to a problem must be good enough that your target market is willing to pay you for it. So how do we define something so crucial as your customer segments?
When you define your customer segment, you can’t simply take a total population and assume that is your market. For example, let’s assume you found some information that indicates there are x million people who have what seems to be the problem you identified. Let’s use an example.
I am interested in helping seniors go into entrepreneurship. I know that many seniors I have spoken to are interested and are struggling to decide whether to go into business as a new career. I want to help. So what do I do?
I research how many people are over the age of 50 in the US. I found there are 109 million. This is a reliable figure based on the National Council on Aging. Does that mean my population of people who could be my customers is 109 million?
I wish, but the answer is NO! No way.
Why? Because if you get granular, you will find that of that 109 million people, many are happily working, many are retired, many are ill or disabled and unable to work.
After further research, I found that 370 people of 1,000 people over the age of 50 plan on starting a business of some kind. That makes 40 million people. Within that group there are people who want to start a business having identified a problem in their community that a business could solve. The number is 4 million Americans over the age of 50 who are interested in starting a business from a problem perspective.
Now, I know that I want to serve people over the age of 50 who have enough money to pay for my services, who are searching to change their career. I know that though I’m not sure how I can reach 4 million people located all over the country, at least I have a realistic customer base to work with. They are referred to as served available market.
Now, what is my target market, the ones I know I can reach? How will I reach them?
This exercise is quite important:
- Who is your intended customer?
- What do you think is the market size, in other words how many people or what is the geographic size of your market?
- Can you identify specific demographics of this group of people? (Their age, gender, socio-economic status, other specifics that identify who your customers are. Maybe where they live, do they need reliable transportation to access your service? Do they need to have a specific education level, specific interests, are they handicap? What other identifiers can you name to help you be as specific as possible.)
The more specific you can be, the better you are in identifying your potential customers.
Why is this so important in the beginning?
If you identify a certain group of people and their characteristics, you will also know how to satisfy them, and how to reach out to them. If they are millennials, they can be reached through social media. If they are young mothers, they could be reached through online forums, Instagram, perhaps word of mouth. If you want to reach the over 50 group, Facebook is a great venue. Don’t waste money on email, advertising, promotions when you don’t know HOW to reach your customers. There is no need to guess. Knowing your customers, and their specific demographic, you will also be able to learn how to reach them, how to capture their interest, and how to keep them engaged in your business.
For more information on this topic, check out these additional articles. If you’d like to discuss these or any of the information we have provided on the Silver Founder Academy website, please feel free to reach out.