The Target Market section of the Pitch is a place to identify who your most likely customers are, and how much potential income they represent for your business. Our customers have a lot of questions on this section, so we've compiled our answers to the most frequent ones here. If you have questions that aren't addressed here, please feel free to contact us.
How do I figure out who my most likely customers are?
If you're not sure who your business will be serving, you may want to do some market research to find out. Market research is the process of learning who buys the kind of product or service you sell, where they're located, and why they buy.
LivePlan does not provide market research, but here are some helpful starting points:
If you are in the U.S., your local Small Business Development Center may have access to market reports. Outside the U.S., we recommend doing an online search for an entrepreneurship or small business support agency in your area.
How do I divide my customers up into market segments?
It can be tempting to think of all of your customers as being the same kind of person - for example, a coffee shop owner might assume his customers are all "people who like coffee." But in many cases, a business provides different kinds of value to different kinds of customers. In the case of our coffee shop example, here are some possible customer segments (also known as "prospects"):
- Students of a nearby college, who need a place to study
- Local freelance workers, who need a location for meetings
- Weekend shoppers, who need a place to take a break
Each of these segments is coming to the coffee shop for a different reason. If you understand your different types of customers, then you can understand more about their needs - and this helps you plan your marketing activities.
If you're not sure what types of customers your business will have, these articles may be helpful:
- How to Define Your Target Market, by Tim Berry
- Cutting the Pie: Segmentation, Setting Targets, by Tim Berry
- The Importance of TAM, SAM, and SOM in Your Business Plan, by Caroline Cummings
What do the numbers mean?
For each market segment you've identified, you'll need to estimate two pieces of data: how many of these customers are available to your business, and how much you think they spend annually on products or services like yours:
Your market research will go a long way toward helping you come up with these estimates. And remember, forecasting is educated guessing. You can always update your forecast later if you find some new information.
How do I add the Target Market graph to my Plan as well as my Pitch?
If you'd like to have the finished graph appear in your full business plan (the one you create in the Plan tab of LivePlan), you can take a screenshot of the graph. (If you're not sure how to do that on your computer, this page should help.)
You can then import the screen shot into any text section of your plan as an image.