Do You Know Your Target Market? If Not, It’s Time to Get Focused.
By Bill Warner, EntreDot Executive Director and Executive Mentor
You don’t have to talk to an investor or company board member for more than five minutes before the word focus comes up. It is death to any business plan that wanders through a dozen possible initiatives for the business. You will be dismissed if you even hint at hiring people or purchasing equipment that is not relevant to your business. If you are not clear about how your product or service is marketed and sold, the prospects of getting the support you need is zero. The message is: “be unwaveringly focused.”
What Does it Mean to be Focused?
The dictionary definition is: bringingintofocusoralignment; toconvergeorcausetoconverge; ofideasoremotions. It’s being adjusted, centered, centralized, concentrated, or convergent. In business it means:
Having a clearly defined market that you will aggressively pursue
Being able to have influence within the market environment
Understanding exactly who your buyer is and why they buy
Offering a clearly differentiated product or service
Knowing your competition and how you will beat them
Creating well targeted marketing programs
Forming effective sales channels
Establishing well thought out revenue and financials models
Attracting a strong management team
Showing successful company progress
What Does it Mean to be Unfocused?
Conversely, the dictionary says that being unfocused is:notconcentratedatonepointorupononeobjective. Likewise, the business meaning is:
Having too many market segments to chase
Not understanding your buyer and their issues
Developing a “me too” product
Solving a “nice to have” need
Defining irrelevant marketing programs
Having the wrong approach to sales
Not fleshing out an affordable financial model
Continuing with weak and inexperienced management
Not meeting milestones
Find Your Focus
Basically, what this means for your business is that you need to have everyone in the company on the same sheet of music with respect to your business strategy and plan. All communication to investors, alliance partners, vendors, contractors, employees and the media have to be clear, concise and consistent.
The management will be expected to keep the company on track and not diverge into other business initiatives that are not essential to meeting their near–term milestones. Being unfocused will result in consuming valuable resources that will not be spent on the most important activities that are necessary to meet the company’s objectives.
Have a Focused Market
From the onset of a business idea, you must be able to narrow in on a specific market opportunity. If your business plan pursues more than one primary market segment, you are in trouble. Why? It takes a lot of resources to pursue a single market. For each market segment, you will have to have the right product, marketing approach, sales channel, sales skills, support structure and administration. If you try to go after more than one market at a time, you will be substantially multiplying the resources you will need by the number of markets you are chasing. This adds tremendous risk to your company, increasing the possibility of failure because you are doing too many things at once and eventually run out of money. Additional market opportunities can be pursued, once the first market is successfully addressed.
Have a Focused Understanding of Your Buyer
You must clearly answer the question, “who will buy the product or service, and why?” This requires you to explain the customer need you are fulfilling, bringing it down to dollars and cents. The buyer’s return on investment has to be large and nearly immediate in order to successfully compete with other buyer spending priorities. Know how to make the buyer aware of what you offer. Validate your value proposition. Know how to influence the buyer’s decision. Know how they make buying decisions. If you don’t know these things you are likely to fail.
Have a Focused Product That Wins
Your product or service has to be a “winner.” That is, it has to clearly meet your buyers’ needs and be better than all other alternatives available to the buyer. Quite simply, if you cannot describe your offering in these terms, you probably don’t have a winner. Your product has to be offered at a competitive price, but also be affordable to develop, market, sell, manufacture, distribute and support.
Have a Focused Marketing Plan That Generates Leads
The marketing plan has to create awareness, excitement and interest in order to generate qualified sales leads. Marketing is all about getting sales leads; nothing else counts. If you are using the wrong marketing channels and tools to achieve this, you are wasting money and will not get sales traction. Advertising in publications that aren’t read by your buyer doesn’t make sense. Tradeshows that don’t attract your buyer is a waste of time and money. Sending mails to people that are not in your market is a waste as well. Thoughtless and unfocused social media posts will also waste time and money. Don’t spend money on marketing initiatives unless you can clearly see how they will generate leads.
Have a Focused Sales Approach That Affordably Closes Sales
Your sales channel has to turn sales leads into closed sales. Selecting the most effective and affordable sales channel will ensure that you will make a profit. Make sure that your cost of customer acquisition will be affordable. At the heart of it is selling through a channel that is preferable to your potential customer. You should have learned that in your market research work earlier, determining if they buy direct or through some form a value-added distribution channel.
Have a Focused Financial Model That Describes a ProfitableBusiness
Of course, the most mind-numbing part of running a business is making sure the financial model really works, from both a profit and cash flow point of view. Many companies miss the fact that starting a business with delayed cash collections creates a negative cash position when you have bills to pay before you collect the money from customers. Having a cost of goods sold structure that leaves insufficient gross profit to pay expenses is a non-starter. Spending more on marketing and sales than the price of the product is disastrous. Your financial model needs to be viable and a lot of careful analysis is necessary to avoid running out of money.
Have a Focused and Experienced Management Team
There is no substitute for wisdom and experience, and every company should have a healthy share of it in their management team. Companies go through many transitions as they grow. The management team has to know how to deal with the unique business challenges at every transition point. Having successfully managed these transitions many times before is essential experience for growing your company. Else, your company will stumble their way through them and run a very high risk of failing.
Have an Unwavering Focus on Meeting Your Milestones
Nothing is more powerful than getting business results. If you have developed a high– quality product and service, created a lead pipeline, achieved sales, won awards or gotten a patent, you have been meeting important business milestones. It shows that your whole team is dedicated to getting things done, on schedule, within budget and with high quality. Potential business partners, advisors, board members and investors are attracted to teams that are successful.
Focus! Focus! Focus! There is nothing more important to your success. Companies that stay on a focused track will have the greatest chance of success.
About the Author
Bill Warner is co-founder and Executive Director of EntreDot, a non-profit organization that helps entrepreneurs start new businesses. He is also a Fund Executive of the Inception Micro Angel Fund (IMAF-RTP), an angel investor organization and Managing Director of Paladin and Associates, a business consulting firm.