The journey between a great idea and a fully operational business can be exciting, tedious, scary, expensive, and frustrating all at the same time. The primary challenge is amassing all of the pieces necessary for building a sustainable business, or better yet, knowing all of the pieces necessary.
Currently, 55% of all businesses fail in the first five years. While there are many explanations offered across academia and the Internet, my experience as a business strategist points to two specific areas; Planning and Marketing.
Within those constructs lie the building blocks for any successful business and any flaws within their assembly will usually manifest itself as an unanticipated problem that in many cases, is fatal.
In my efforts to reduce the number of failed businesses, I want to offer five things for your consideration while you are in the idea or early building phase. In order to give a working understanding of these suggestions, we will use a “barbershop” as the target business.
1. Need Analysis
One of the greatest misconceptions in building a business is “if you build it, they will come”. The Internet has forever changed the way consumers purchase products and services, so simply existing is not enough.
As a potential business owner, you must determine if there is enough need for the product you are bringing to market to sustain your revenue and growth goals. Here are the details you want to uncover during your investigation:
- How much do men spend on personal grooming annually?
- How much do men spend annually on haircuts?
- How often do men get haircuts by age and profession?
- What is the average cost for a haircut nationally and regionally?
- Who is providing that service in your area now?
- What’s wrong with the solution they are using now?
- What will make them switch to your barbershop?
Before you ask where you would find this information, just know for any profession, there is usually a national association or organization (i.e. https://www.nationalbarberboards.com/). Other resources include the Bureau of Labor Statistics, Small Business Administration, and many colleges and university libraries.
Finally, you can be very specific with Google searches by asking exactly what you want to know (i.e. “How much do men spend annually on haircuts?”). This information sets the stage for the most important aspect of building a business, your target audiences.
2. Target Market Identification
Targeting a specific market does not mean you have to exclude others in your direct service area. Rather, target market identification allows you to focus marketing dollars and brand messages on the specific groups you believe are more likely to buy your products. This is a much more affordable, efficient, and effective way to reach potential clients and generate business.
Taking into consideration the data you retrieved from your Need Analysis, what you are looking to discover next is the following:
- Which generation spends the most on haircuts (Millennials, Gen X, etc.)?
- Which generation gets their hair cut most often?
- What are the professions of those who get their hair cut most often?
- How much do they spend on other hair and skin care products?
- What is the average household income for this group (nationally and regionally)?
- How does this group consume information (i.e. TV, Internet, newspaper etc.)?
- What percentage of haircuts are for people under the age of 18?
- What percentage of haircuts are for women?
The goal of gathering this data is to build a preliminary profile of users you believe will patronize your business most often. It also forms the basis for a deeper dive into specific segments within those profiles to further increase the likelihood of customers visiting your barbershop.
3. Target Market Segmentation
At its core, market segmentation is the practice of dividing your target markets into groups that have specific needs that coincide with your product. These segmentations may be based on professions, special interests, priorities, values, and other consumer behaviors.
Let’s assume the target market identification showed your target audience is men 20 – 55. A good example of the type of information you are trying to discover includes:
- What is the ethnic breakdown of this group?
- Do they live in rural or urban areas?
- Are they homeowners or renters?
- Are they married or single? Children?
- Favorite social media platform?
- Interests (i.e. sports, outdoors, racing, etc.)?
- Values (i.e. family, environment, honesty, etc.)?
By understanding your market segments, not only can you leverage this information for better targeting in products, sales, and marketing strategies, but you can determine if there are enough potential customers in your direct service area.
4. Size of Your Serviceable Market
In the decision process of whether to bring a new product offering into a given market, the market analysis provides evidence (or lack thereof) that there is a niche in the market that your company can exploit. This analysis provides the foundation on which your marketing plan can be built.
Now that you have a crystal clear understanding of your target markets and their segmentation, the next question is if there are enough of them in your direct service area to meet your revenue and growth goals.
In determining the serviceable market size, we will look at the average drive time of 10 minutes in the city of Ocala, FL. Although 15 minutes is the normal acceptable drive time, given the density of barbershops in the market, we will keep the drive time to neighborhood users.
One of the most effective ways of analyzing market size is zip code analysis. Many of the websites such as www.city-data.com will provide you with demographic information that will allow you to build a data table based on the target market and segmentation characteristics you have found thus far.
A sample of one of these data tables is as follows:
Taking into consideration in this example 48% of the residents listed above are male, the serviceable market size is 99,381 potential customers. With that information, you can choose which of the zip codes you will locate your barbershop, your price points, anticipated market share, and revenue projections.
More importantly, you have enough data to create your marketing plan geared specifically toward your audiences.
5. Marketing Plan
The Internet has also changed the way people receive information. Gone are the days when simply running an ad with all of your product’s features and benefits is enough. Today’s consumer is so inundated with marketing, advertising, and visual interruptions that they have become very efficient at ignoring things that are not relevant or engaging.
People want to know more about who your company is, what were the motivating factors in its origin, and how does your passion bring value to their lives.
The primary goal of the marketing plan is to attract, engage, convert, and retain customers. With an understanding that your business is not what you say it is, but what the customers tell one another it is. Therefore, the main components of your marketing plan should accomplish the following:
- Define your brand identity.
- Tell your brand story.
- Describe your impact on your community.
- Deliver your brand promise.
- Evaluate your brand experience.
- Reward brand loyalty.
Your marketing plan will also contain your marketing strategies, which go into specifics of your marketing mix (i.e. social media, blogs, newsletters, etc.), messaging, and call to actions, but for the purpose of this article, it is more important you get the foundational pieces right first.
Being an entrepreneur is about a willingness to put your financial security and lifestyle at risk for a belief in your ability to satisfy a demonstrated need. In 2019, only 10.6% of United States residents were business owners.
I applaud, respect, and support anyone who is foolish enough to take on business ownership and hope this article serves as a wakeup call to the seriousness of the effort and what it takes to truly make it happen.
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