Let's keep our office furniture example and try to estimate the value of the 'desk' segment. We would first factor in the size of the businesses in our delivery range in order to come up with the size of the desks park.
Then we would try to estimate the renewal rate of the park to get the volume of annual transactions. Finally, we would apply an average price to the annual volume of transactions to get to the estimated market value. You can get the number and size of businesses in your delivery area from the national statistics. Your accountant should be able to give you the useful life of a desk but you should know it since it is your market! You can compare the desk prices of other furniture stores in your area.
As a side note here: it is always a good idea to ask your competitors for market data just don't say you are going to compete with them. That was the bottom up approach, now let's look into the top down approach. The top down approach consist in starting with a global number and reducing it pro-rata.
Once again the number of employees would only be a rough proxy given all business don't have the same furniture requirements. When coming up with an estimate yourself it is always a good practice to test both the bottom up and top down approaches and to compare the results. If the numbers are too far away then you probably missed something or used the wrong proxy.
Once you have estimated the market size you need to explain to your reader which segment s of the market you view as your target market. Target Market The target market is the type of customers you target within the market.
For example if you are selling jewellery you can either be a generalist or decide to focus on the high end or the lower end of the market. This section is relevant when your market has clear segments with different drivers of demand. In my example of jewels, value for money would be one of the drivers of the lower end market whereas exclusivity and prestige would drive the high end.
Learn to identify market needs by reviewing these examples. Size of Market You need to know how big your potential market is. This is the group of people who are likely to buy your product or service. Unless you are in a very specific niche, you want to find a large group of buyers. For example, if you want to sell a new weight-loss program, you may have a large market of 50, people in your area that are between the ages of 25 and 65 who are trying to lose weight. If your weight-loss program required surgery, you are looking at group that's smaller than the 50, who have a medical need, as prescribed by their doctor.
This group size in the same geographical region might only be 5, Understand Your Customer Profile In order to determine the size, you need to understand who your ideal customer is. As described in the weight-loss example, knowing if someone is trying to lose a few pounds to look better in a bikini is different from a diabetic who must lose 25 pounds to prevent serious medical repercussions.
It's the people you might someday reach, or people you could reach, that you need to be concerned about. For example, the market of a local movie theater or restaurant includes not just the people who regularly go there but everybody who lives within driving distance. The market for a landscaping business includes all the homes and commercial properties within a logical reach. The market for downloadable e-books over the internet includes everyone connected to the web.
The market for personal computers includes homes, schools, businesses, and government organizations. It's your plan--and every plan is different--so you need to know as much as you can about your target market.
Getting the Information The information sources that will help you conduct a market analysis are different for every business plan. For example, you might need local information you can get from your local chamber of commerce. You might also need to find other government statistics, or other commercial statistics, so you may be conducting some internet searches to track down the information.
Not all the information you need is going to be publicly available, and you may have to settle for educated estimates. Sometimes you'll have to extrapolate information from different sources to get the information you're seeking.
I've seen good market research come from telephone directories, catalogs, industry association statistical compilations, real estate information and density maps. Segmentation Always try to divide your target market into useful slices or segments.
For years, I consulted with a computer manufacturing company that targeted such market segments as homes, small offices, businesses, educational organizations, and government.The questions that affect target markets will be different customers you target within the market. Target Market The target market is the type of for every business, and these are just examples. My father joined me and began naming the illuminated available for the Graduate admissions essay advice she would have been forced.
References 2 Entrepreneur: Target Market About the Author Neil Kokemuller has been an active business, finance and education writer and content media website developer since Be concise and compelling with the market analysis, and remember that a good graphic can cover a lot of text, and help you make your point. Consider Cultural Components A marketing plan should consider the geographic and cultural elements of your target group. Include geographic descriptions, target demographics, and company profiles if you're B2B. Understand Your Customer Profile In order to determine the size, you need to understand who your ideal customer is.
Basic information every company should know about their competitors includes: each competitor's size and market share, as compared to your own how target buyers perceive or judge your competitors' products and services your competitors' financial strength, which affects their ability to spend money on advertising and promotions, among other things each competitor's ability and speed of innovation for new products and services There may be a wealth of other facts that you need to know, depending on the type of business you have. Talk to their customers and examine their pricing. Can I differentiate myself from the competition in a way customers will find meaningful? The precise way in which you choose to organize this information is up to you. You've already defined and mapped out your products and services. Is the overall industry growing, stable, or in decline?
In addition, we anticipate greater than industry-norm growth rates for cycling in the area due to the increase in popularity of cycling events like the Alpine Loop Gran Fondo. For example if you are selling jewellery you can either be a generalist or decide to focus on the high end or the lower end of the market.
You can generate them fairly easily with tools built into Google docs and free infographic apps and software. He has been a college marketing professor since Research is the key here, and there are several sources available. They can be excellent sources of information to aid your research. Not all of these businesses will be directly competing with you, however.
What is the population and spending habits and levels? Our only other competition are the bike shops in Harrisonburg, VA, and our location will give us a competitive advantage over those and other companies who try to serve our market. Your goal is to thoroughly understand the characteristics and purchasing ability of potential customers in your market. Lower-income buyers typically want a vehicle that gets them where they need to go with high fuel economy, safety and dependability.
As described in the weight-loss example, knowing if someone is trying to lose a few pounds to look better in a bikini is different from a diabetic who must lose 25 pounds to prevent serious medical repercussions. For example, if women aged 18 to 54 are your target market, you need to know how many of them there are in your market.
It's your plan--and every plan is different--so you need to know as much as you can about your target market.
In our case the cycling rental business does not require much segmentation. Always relate the data back to your business. Developing and offering distinct features, a lower price, elite service, better materials, environmental responsibility, nutritional value or an all-in-one solution are ways to distinguish your company's brand. A specialized product no one else can manufacture?
On the other hand, if you live in an area with 50, people and there's only one bicycle shop, you may be able to enter that market and attract a major portion of bicycle customers in your area. Use this section of your business plan to explain your understanding of your industry, your market and your individual business so that lenders and investors feel comfortable with your possibility for success.
While you might not compete directly against these companies they are likely to be large national or international corporations , it's important that you can identify them, and have a good understanding of their market share and why they are or aren't successful. A tangible need means a customer needs a product that offers tangible benefits. You would however factor it when assessing the value of the market. Now let's take a look at the next major component in a business plan: your Sales and Marketing strategies. On the other hand, if you live in an area with 50, people and there's only one bicycle shop, you may be able to enter that market and attract a major portion of bicycle customers in your area. The top down approach consist in starting with a global number and reducing it pro-rata.
While data is good, and more data is great, sifting through and making sense of too much data can be daunting. By how much per year? A smaller, more homogeneous market segment allows you to focus on particular needs.