The Size of Your Target Market Versus Your Profit
by Samson Itoje
The size of the target market for the products or services your business sells will have a direct impact on the profit potential of your business.
So, what is target market?
The target market for your business is the group of potential customers who are likely to be interested in the products or services offered for sale by your business.
Remember that not everyone in your target market will buy from your business because of issues such as . . .
>> The presence of strong competition
>> The business environment
>> Product coverage / licensing limitations
>> Price differences
>> Regulatory challenges, especially across countries
>> Shipping costs
. . . and a host of other considerations which may be outside your control.
However, irrespective of the challenges listed above, the size of your target market still plays a huge role in the level of profitability of your business.
The Concept of Market Share
When your business offers a product or service that adds value to your customers, and your business offers quality after-sales service, your business is bound to have some customers.
The percentage of customers your business secures relative to the total market size is called your market share
Now suppose the size of your target market is about 100,000 people.
If your business sells to 1 percent of that market size per year, your business will make a total of 1,000 sales.
What if you can somehow increase the size of your target market to, say, 1,000,000 people while retaining your market share of 1 percent?
Well, in this second scenario, your business will make 10,000 sales per year. That is, your business gets to 10 times more sales simply by targeting a bigger market size.
If you want to start a business that will make you lots of money, choose a business that gives you an opportunity to sell to a larger audience.
Yes, increase the size of your target market!
How To Increase The Size of Your Target Market
So, how do you increase the size of your target market so as to improve your chances of making more sales and more money from your business?
It all starts with your choice of business.
When thinking of starting business, choose a business that allows you to sell to more people . . . a business that is not limited by location.
For example, think of business people who sell internet modems that provide internet connectivity to people within a small town.
If the town has a population of 100,000 people, and the internet modem will not work anywhere else, then this business person has a serious cap on his market size.
Consider a different scenario.
Suppose a business person who lives in a country with a population of 100 million people sells a product that can be easily shipped to anyone anywhere in the country.
Suppose too that the product is a food product that lends itself to repeat purchase several times a month.
This two combination . . . large target market and high repeat purchase potential . . . immediately creates a deluge of demand that can skyrocket the business owner's sales and profit far beyond his dreams.
Think deeply about the size of the target market (and potential for repeat purchase
) before choosing to invest in a specific business.
Choose to sell a product or service with wider appeal . . . a product or service that can be sold to at least everyone in your country not just people in the small town where you live.
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