Establishing the size of your target market in your business plan is vital. Learn how to determine the size of your target market and present this information to investors. Further, the size of the target market is a precursor to establishing your anticipated revenues and/or market share. In this discussion, I assume that you have already identified why your particular target market is attractive to your venture, who your competitors are, and that you have carefully segmented this market (geographically, demographically, etc). If you are unsure about how to segment your market, read this insightful post on market segmentation. This is the first part of a two-part series of blog posts.
Where can you get information pertaining to your target market?
What information is important concerning your target market?
Ultimately, the investor primarily wants to determine the attractiveness of your target market. This includes, but is not limited to:
- The size of your target market.
- The rate of growth of the target market
- The market share that you seek to attain within your target market over time
An example of how to present information pertaining to your target market
The following is an example of how information listed above can be presented. This is taken from a business plan that I wrote some time back (no copyright issues infringed)
As you can see from the snippet above, you will see notice the following:
Simplicity – information is presented in a simple, straightforward manner.
Source of Statistics/Data – the source of data is mentioned.
Use of the Appendix section – the description pertaining to the size of your target market should be very short. Extra information is given in the appendix. The appendix section is where you should place information that would otherwise clutter the business plan or obscure the main focus of a point. In fact, the above example only covers about half a page.
Use of diagrams – ‘pictures speak a thousand words’. The figure shown (Figure 1) clearly shows the reader how ABC Inc projects its market share growth.
Conclusion: Tips and Pointers
- Avoid lengthy prose – Remember that the investor ultimately wants to determine the attractiveness of your proposed target market. Do not make the mistake that many make – writing pages of prose which only serve to obscure the facts. While it is good to provide details, reserve most of the details for the appendix as the example has shown – present only the key facts in the main business plan.
- Is the market size readily available or is there a need to calculate? – The particular example given above is a case where, luckily, the size of the target market is given directly from a reliable source. However, in many cases, the size of the target market may not be directly available but must be calculated by deductive reasoning using available information from one or even several sources. I will provide an example of such a case later under this series.
Next from here?? ====> Look out for Part 2 of this series which explains exactly how to calculate the size of your target market together. I will also provide an example.