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Business Plan and Target Markets
moltar

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 1800 posted 4:51 pm on Apr 11, 2005 (gmt 0)

I've been a freelancer for a while now. Finally I decided to go "full force" and become a "business". The business offers website related services (development, seo, programming). Every business oriented site I've read suggests writing a business plan as a first step of any business.

The business plan should identify a target market of the business. I understand the benefits of having a target market. If I target one market, I will be an expert in it. But this is my dilemma.

Being in the same market will create a conflict of interests between the clients. Basically I will have to make sites for other business' competitors. I feel that it's very unethical.

At the same time indentifying a target market as "small to medium business" is not correct.

I feel like I am not thinking outside the box, but I am really stuck on this.

 

MoneyMan

5+ Year Member



 
Msg#: 1800 posted 9:45 pm on Apr 11, 2005 (gmt 0)

Iím surmising that you are leaning toward a vertical specialty in your target market. When defining a target market for a business it helps to define as many segmentation attributes as possible in order to hone your product/service/marketing message/business practices to resonate with your audience. Therefore, one suggestion that might help is to work on further defining/refining your target market. This may open your eyes to segmentations and thus approaches and business positioning you might have not considered. Think beyond vertical or define it further; look at demographic, geographic, psychographic, and needs-based attributes.

Your ethical dilemma presumes that you not being up front with your clients about your engagement. Assuming the vertical speciality, you may find many companies that value other vertical experience to give affirmation in your ability to understand their industry. Their reaction will depend on the level of client you are dealing with and how broad the differences are between companies within a vertical.

If you do not lead people on up front and you respect their sensitive information when dealing with other clients, I don't think having competing clients is inherently unethical. In fact you can use this as a selling point when talking about operational efficiencies.

johntabita

10+ Year Member



 
Msg#: 1800 posted 1:02 pm on Apr 12, 2005 (gmt 0)

Being in the same market will create a conflict of interests between the clients. Basically I will have to make sites for other business' competitors. I feel that it's very unethical.

I've often felt the same, not that it was necessarily unethical, but that my clients would see it as a conflict. For example, earlier this year, I completed a site and we began a SEO campaign. My client has 5 major competitors online, so the goal was to develop a more professional-looking site that they had (not a difficult task), then get higher search ranking than the others. Since this is a specialized industry with a limited amount of players, I do think it would be a conflict of interest to approach my client's competitors with the same offer. (On the flip side, I'm sure if I aproached those five competitors and showed them what I did for the other company, I'd have 5 more clients...)

Perhaps targeting industries that are more saturated, such as attorneys, might not represent the same conflict.

I keep hearing and more and more on this topic. In fact, in a book I'm currently reading, the author recommend that if you sell a horizontal product across multiple industries, you should consider verticalizing, because executive-level buyers want proven solutions from experts who understand their industries, not from generalists. He also recommends you join and participate in that industries trade associations.

superbird

10+ Year Member



 
Msg#: 1800 posted 1:36 pm on Apr 12, 2005 (gmt 0)

As the others have said, you need to consider targetting horizontally rather than vertically. Maybe you could become the expert in business blogs or ecommerce or subscription sites for example. Then you can demonstrate expertise in something rather than being seen as a dillettante but still keep boundaries between clients.

iamlost

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 1800 posted 5:30 pm on Apr 12, 2005 (gmt 0)

The business offers website related services (development, seo, programming).

The business plan should identify a target market of the business.

You answer your own question: your target market is whosoever wants web development, seo, and programming at your price; your target market is not the client's market (i.e. hotel, chemicals, farm equipment, etc.).

A best practice approach that I use is similar to the non-competitive clauses in some employment contracts - do not take a clients direct competitor as a client until one year after completion of any contract with the first. Indeed, I use it as a "selling" feature and include it explicitly in my contracts with clients.

On the other hand - please limit your client base and specialise in curly red widget manufacturers. I will refer all such to you if you will refer all others to me. Thank you. :-)

moltar

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 1800 posted 6:25 pm on Apr 14, 2005 (gmt 0)

Sorry for the delay, I was just really busy. I was also migrating to Linux (Ubuntu). Took me some time :) Now I use it full time!
---

Your ethical dilemma presumes that you not being up front with your clients about your engagement.

This is a good point. This is exactly the thing that I needed :) That is what I meant about "not thinking outside the box". I like this idea!

Perhaps targeting industries that are more saturated, such as attorneys, might not represent the same conflict.

That's pretty close to the target market I wanted to go after.

if you sell a horizontal product across multiple industries, you should consider verticalizing, because executive-level buyers want proven solutions from experts who understand their industries, not from generalists. He also recommends you join and participate in that industries trade associations.

I read the same thing. That's what got me worried. I thought that maybe web industry was a little different, and that it doesn't follow the same rules. Then I thought of several more examples of other industries where the clients might be in conflict. I questioned myself "how could this be possible?" and came with the question to WW :)

As the others have said, you need to consider targetting horizontally rather than vertically.

I think MoneyMan and johntabita were pro vertical market, not horizontal.

You answer your own question: your target market is whosoever wants web development, seo, and programming at your price; your target market is not the client's market (i.e. hotel, chemicals, farm equipment, etc.).

You are right and wrong. That is my current "target market" - anyone that needs a website. But I am trying to narrow it down to an actual "market" I want to target, so that I won't be too general. Get into my own niche.

On the other hand - please limit your client base and specialise in curly red widget manufacturers.

Sounds like a good market and a good deal :)

johntabita

10+ Year Member



 
Msg#: 1800 posted 4:11 pm on Apr 15, 2005 (gmt 0)

You answer your own question: your target market is whosoever wants web development, seo, and programming at your price; your target market is not the client's market (i.e. hotel, chemicals, farm equipment, etc.).

You are right and wrong. That is my current "target market" - anyone that needs a website. But I am trying to narrow it down to an actual "market" I want to target, so that I won't be too general. Get into my own niche.

You're right about that. Defining your target market as "whosoever wants my product/service at my price" is way too general and amateurish at best.

There are different ways to define your target market. Keep in mind that a vertical market is not exactly a "niche." It's simply targeting a specific industry (such as hotels or farm equipment manufacturers). A true niche is discovering and meeting an umet need not being served by other companies; or providing a superior solution for small groups of customers than larger companies are able to offer.

You can also target by demographic, such as companies with a certain annual revenue or number of employees, which is neither vertical or niche.

When verticalizing, be sure to do your research. I have a P.I. client who used to send me links to other bad P.I. websites. This got me thinking about targeting that market, so I had a conversation with him and found out that the majority of independant P.I.s work out of their home and build their own websites (which explains why so many of them were so bad). He told me that many of his colleagues couldn't believe he "paid so much" for his website (believe me, it wasn't that much). So a little research goes a long way towards avoiding a lot of wasted time.

iamlost

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 1800 posted 6:36 pm on Apr 15, 2005 (gmt 0)

So you specialise in tourism (as a broad niche example) and will turn down a chemical manufacturer solely because they aren't within your "specialty"?

That is truly amateur hour.

Over time you will likely find (if you haven't already) that most referrals from satisfied customers are in related industries and a natural specialisation can occur. That doesn't mean you should refuse others given you have the time and they have the money.

Also over time a niche can dry up: from competition pushing prices down, web dev funds decreasing in a down economy, etc. and if you are too specialised you go broke or suffer until you settle into another niche to repeat the process.

Even when you are developing sites for yourself multiple sites across several niche markets are helpful in evening out economic swings.

Specialisation in our industry is limiting your offerings to a subset of site development: DB design, SEO, etc. Many people do well as specialists.

I do it all - because I like variety - for any qualified client. My time is booked for the year. Seems professional to me. Profitable at least.

moltar

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 1800 posted 7:12 pm on Apr 15, 2005 (gmt 0)

Of course I would not turn down a client. But when targeting a market (thru ads, style, copy, etc...) that is where it helps.

johntabita

10+ Year Member



 
Msg#: 1800 posted 7:33 pm on Apr 15, 2005 (gmt 0)

So you specialise in tourism (as a broad niche example) and will turn down a chemical manufacturer solely because they aren't within your "specialty"?

That is truly amateur hour.

Over time you will likely find (if you haven't already) that most referrals from satisfied customers are in related industries and a natural specialisation can occur. That doesn't mean you should refuse others given you have the time and they have the money.

Also over time a niche can dry up: from competition pushing prices down, web dev funds decreasing in a down economy, etc. and if you are too specialised you go broke or suffer until you settle into another niche to repeat the process.

First of all, I wasn't my intent to imply that you were an amateur, so if I've offended you, I apologize. My point was, that if you presented your business plan to a bank or a marketing consultant, they'd consider it amatuerish if you'd described your target market as, "whosoever wants my product/service at my price".

Second, you must differentiate between getting word-of-mouth referrals and targeted marketing. Of course you wouldn't turn down a lucrative project just because it was outside of your industry. But word-of-mouth referrals is not targeted -- you can't necessarily control who gives you a referral and from what industry it will come. What I'm talking about is narrowing your focus in your other, more targeted marketing, such as cold-calling or direct mail. That's where you have the ability to target to a more specific audience.

Of course a niche can dry up. That's why most experts I've read on the subject recommend focusing on a specific industry or niche for a period of time, then moving to another (especially before what you've described happens).

surfin2u

10+ Year Member



 
Msg#: 1800 posted 10:03 pm on Apr 15, 2005 (gmt 0)

I think that planning things out in advance is great...to a point. You may discover that your first few clients don't come from where you expect them to, and that your business develops a life of its own, in a sense. It's good to think things out in advance in order to prepare yourself, but being able to "think on your feet" when dealing with prospective clients is also very useful.

I can't tell you how many times I told myself that if somone told me 3 years ago what I'd be doing today, I'd have said, "no way, you've got to be kidding!"

I've still got some plans that I put together before starting my business, and when I look back at them I realize how much I've learned since then and how differently things have turned out from what I imagined. Maybe it's not that way for the the sort of business you're looking at, but that's how it's been for me.

iamlost

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 1800 posted 11:36 pm on Apr 15, 2005 (gmt 0)

Easy to irritate, hard to offend. None taken.

We appear to hold somewhat differing views which is usual for me.

they'd consider it amatuerish if you'd described your target market as, "whosoever wants my product/service at my price".

One words it some what differently in a Business Plan. :-)

The last place to limit scope in a BP (or in reality) is potential revenue sources. My original BP market analysis ran 62 pages and covered 92 specific categories in 17 industries.

My BP is still updated yearly. When down to 90-days remaining work I focus my marketing on the area(s) with the greatest current potential. Over the years it has been various types of tourism accommodation, eco-tourism, indie music groups, databases/interfaces for wholesalers, etc. At the same time I follow up every rumour of an RFP and work past clients for referrals/updates/maintenance/seo.

In a sense I am continually changing my market specialisation. The thought of simply finding a nook and getting comfortable seems strange and limiting.

Not wrong, just strange. Do what works for you. However strange. :-)

For moltar: "may fortune smile on this talented man to recompense him for his labors."
<Jean- …mile Humbert, letter, 1828>

MoneyMan

5+ Year Member



 
Msg#: 1800 posted 5:32 am on Apr 16, 2005 (gmt 0)

I think MoneyMan and johntabita were pro vertical market, not horizontal.

I wouldn't say I'm any more pro vertical than pro horizontal. I was merely pointing out that given your dilemma, you could still target vertically if you adjusted your approach.

I believe a well thought out business plan (or at least going through the exercise) will help you focus and give you a point of reference. Then as the opportunities arise, such as a potentially new client's outside your target market, you can evaluate and adjust your point of reference and direction accordingly. Even if the adjustment is just in your head or how you give your elevator speech.

Then again, sometimes it's just about paying the bills and you throw it all "strategic direction" out the window and take the client. :)

Good luck to you!

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