If you are an aspiring entrepreneur, there are many important decisions that you will need to make while your company is young: what the leadership structure will look like, what kind of equity shares people will get, when to start raising capital, etc.
And if you want your startup to get up and running, there is one decision you must be maniacal about in order to gain any momentum: your target market. Whether your idea is in its infancy, or your product is ready for primetime, selecting your market is essential before you begin selling.
Much has been written about competitive corporate strategy, but I believe that target audience size is not a choice for start-ups, because all businesses should start small until they get enough traction to think bigger.
My company, HubSpot, started small, and originally aimed to help a few businesses build their customer base through inbound marketing. Since then, we’ve grown to service diverse industries and thousands of customers around the world. Our customer base has expanded so radically that we are about to open our fifth office, this time here in Singapore, to better serve this burgeoning market of startups.
There are two kinds of businesses in the world…
When looking at other businesses, you might have noticed the two different ways they market themselves to audiences: some have many customers, while others have very few.
Companies with many customers use what is known as a “horizontal” strategy — this includes businesses like Google, which has over one billion unique monthly users. Their target market includes anybody on earth who has a question and needs an answer. Imagine trying to compete with Google — might be kind of hard, right?
The opposite strategy is “vertical”, and targets a very small number of customers. The Singapore-based startup and VIP planning app NOX, for example, targets an affluent, nightlife-loving crowd. Because only a select demographic would be considered potential customers, NOX employs a tried-and-true vertical strategy. Fewer customers means less competition, which means a better market share for your business.
Plenty of people do it well
Precise targeting is important, and there are plenty of startups who do it remarkably well. Look at Yumcious, which gives any Malaysian with a knack for cooking the opportunity to sell meals to vendors for profit; or Petsodia, which created an app for Singaporean and Malaysian travellers who need someone to care for their pets. The Singapore startup HERO caters to active people looking for fitness classes but don’t want to pay for a gym membership. All these companies target specific groups in geographically defined areas, limiting the number of potential customers to maximise the value they deliver.
The reality is, even the greatest of companies start small. Imagine Mark Zuckerberg in his dorm room, thinking about his initial audience: his peers at Harvard.
The importance of a strong start
Starting a business is really, really difficult. You have to convince the world your product or service is worth buying (which is no easy feat), and while targeting a broad audience may seem like an easy workaround, I promise you, it’s a trap!
But if you are maniacal in planning and then choosing a focused target market, you are setting yourself up for success — and with success comes plenty of opportunities for future growth. In almost all cases, self-funded entrepreneurs should pursue smaller, addressable markets. The smaller your target market, the better your chances of success.
This article was submitted via Vulcan Post’s submission page by Dharmesh Shah, co-founder and CTO of HubSpot, the leading marketing and sales software company. HubSpot is currently looking for remarkable individuals for its new regional headquarters in Singapore, which will open in Q4 of 2015.