In a B2B startup, there are two questions that you must answer before your company gets very far: what is the product, and who are you going to sell it to? In today’s post, I’m going to focus on the second question, and show you a 3-part process you can use to find the exact target market to focus on.
Before We Begin, Here’s What Not To Do
But, my friends – before we talk about how to do things the right way, let’s take a moment to reflect on the one thing you should not do. Have you guessed it already? It’s sell to everyone.
It’s tempting, isn’t it? After all, your product idea is so wonderful, why on Earth would you want to restrict it to niche? The answer is simple: a product for everyone is a product for no one. Few products have a truly universal appeal, and I’m willing to bet yours isn’t one of them. Unless you can solve a specific problem for a specific audience in a really exceptional way, no one will give you their attention.
The Fisherman, The Psychic, And The Detective
With that being said, let’s move on to the solution to finding your target market for your B2B startup. I’ve encountered three ways to go about it:
- The “Fisherman” Approach: cast a wide net by offering your product to as a diverse group as possible, and see who bites. Then, focus there.
- The “Psychic” Approach: when you feel like you already know who the best fit is, and move forward based on gut instinct.
- The “Detective” Approach: through research and interviews, discover who will be the best using empirical evidence and your judgment.
These are all legitimate approaches, and I don’t think you’d have to search too hard to find successful businesses have been started using each. However, the Fisherman and the Psychic approach present some risks that could actually slow you down.
With the Fisherman approach, the risk is that no one bites, because they didn’t feel you were speaking to them. With the Psychic approach, the risk is that you’re just plain wrong. Or more likely, that you made a merely OK choice but could have made a better one if you had done your homework.
If either of the Fisherman or the Psychic approaches don’t work out, you’ll end up starting over and going down the path of the Detective anyway. That’s why I recommend starting with the Detective approach. It gives you the best chance of finding the right answer the first time around, while only requiring a little extra time and effort
Become A Target Market Gumshoe With These 3 Steps
So how does the Detective approach to picking your target market work? It’s actually pretty easy. You can break it down into three steps:
- Brainstorm and research every suspect you can imagine
- Survey the remaining suspects to get a quick read
- Personally interview the most promising suspects
In the rest of this post, I’ll outline step one of the Detective process: brainstorm and research. You’ll find instructions for steps two and three in follow up posts.
First, List Your Suspects
I was going to start out by saying “imagine that you’re a real detective…“. But I don’t need to, because you kind of already are. Hopefully, you’re not looking for a murder suspect, but like a professional gumshoe, your first job is to gather as many facts as you can that pertain to your case.
Start by making a list of every single suspect you can possibly imagine. This means coming up with every target market that might have a chance of doing business with you. For a B2B company, try to be as specific as possible. Don’t just say “small businesses,” list “dry cleaners,” “fine dining restaurants,” and “yoga studios.”
Here are three pieces of advice for making the most of this process:
- The list doesn’t have to be perfect the first time around. You can always group entries together or split them apart later on.
- Try not to be overly concerned with whether a niche would be a perfect fit at this point. Since you’re just brainstorming, bad ideas can be helpful because they’ll trigger other ideas you may not have come up with otherwise.
- Try to have at least a dozen entries to start with.
Next, Eliminate Anyone Who’s Not A Viable Target Market
Now that you’ve created your list, your next job is to eliminate any entries that simply don’t present a viable opportunity.
This could present itself in a few different ways: (a) the market may not be large enough to be worth pursuing; (b) the market is so large that it’s likely to attract the attention of a larger and more powerful competitor; (c) businesses in the space simply don’t make enough money to afford what you’re offering; or (d) there’s some other circumstance about the market that makes in undesirable.
To answer these questions, you’ll need to do a bit of research. Here’s how we go about it on my team:
- Look up the market size, in terms of number companies within that niche.
- Find out how much revenue a typical company in that niche generates.
- See if the industry is growing or declining and if there are any geographic characteristics that would help or hurt you.
- Use Facebook’s Insights tool to see if there’s anything unique about people who work in that space and to gauge audience size.
- Get your hands on industry websites and publications to see if you can glean any relevant insights on companies in each space,
As you gather this information, cross out any opportunity that no longer looks remotely desirable. Ideally, go through this exercise with a few people on your team. If someone provides a new piece of information that helps you rule out an opportunity, that’s great! She just saved you a lot of wasted effort. Try to be aggressive, and eliminate at least half your list. And if you can, see if you can get it down to 5-10 options.
What’s Next For Picking Your Target Market? Stay Tuned
At this point, you should have eliminated the options that are least likely to get you early traction. With the obvious bad fits out of the way, you’ll now move on to the survey process, where you’ll begin to understand the nuances of each target market in a bit more detail. That’s what we’ll discuss in Part 2.