Business Plan - Target Market

Most business plans cover both the existing size and the anticipated growth rate of the market they are targeting. For example, a business plan for an online discount travel service might point out that travel is the most successful segment of the online industry, and that despite the rapid demise of many dot-com businesses, analysts continue to forecast substantial growth in online travel bookings, particularly as a weak North American economy prompts travelers to search for discounted options. Business plans also quite often include descriptions of potential customers, including their gender, age, level of education, marital status, how they make purchases, and the reasons behind those purchases. When clothing retailer Lands' End began creating a business plan for Land-send.com, the firm knew that a large portion of its customer base owned a personal computer and was twice as likely to have online access than the rest of the population. A typical Lands' End shopper was between the ages of 35 and 54, with an average household income of $60,000. Nearly 88 percent had earned a college degree, and two-thirds were employed in a professional or managerial position.

Discussions of target market also provide information on the history of the market, as well as various trends within the market. While e-commerce entrepreneurs planning to target an emerging market might be unable to produce historical data, they might be able to make comparisons with related markets. Although Amazon.com founder Jeff Bezos was unable to analyze the online consumer book industry—which for all practical purposes did not exist prior to Amazon's launch—while creating his business plan, he was able to examine the traditional book industry. In fact, it was only after researching 20 different products that he believed could be sold via the Internet—including magazines, CDs, and computer software—that Bezos settled on books, guessing that this sizable market, with its wide range of purchase choices, would be well served by the electronic searching and organizing capabilities of the Web.