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Analyzing
Customers in Your Business Plan
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by:
Dave Lavinsky
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The Customer Analysis section of the business
plan assesses the customer segments that the company serves. In it, the
company must 1) identify its target customers, 2) convey the needs of
these customers, and 3) show how its products and services satisfy
these needs.
The first step of the Customer Analysis is to define exactly which
customers the company is serving. This requires specificity. It is not
adequate to say the company is targeting small businesses, for example,
because there are several million of these types of customers. Rather,
the plan must identify precisely the customers it is serving, such as
small businesses with 10 to 50 employees based in large metropolitan
cities on the West Coast.
Once the plan has clearly identified and defined the company’s target
customers, it is necessary to explain the demographics of these
customers. Questions to be answered include: 1) how many potential
customers fit the given definition? is this customer base growing or
decreasing? 2) what is the average revenues/income of these customers?
and 3) where are these customers geographically based?
After explaining customer demographics, the plan must detail the needs
of these customers. Conveying customer needs could take the form of
past actions (X% have purchased a similar product in the past), future
projections (when interviewed, X% said that they would purchase
product/service Y) and/or implications (because X% use a
product/service which our product/service enhances/replaces, then X%
need our product/service).
The business plan must also detail the drivers of customer
decision-making. Sample questions to answer include: 1) Do customers
find price to be more important than the quality of the product or
service? and 2) are customers looking for the highest level of
reliability, or will they have their own support and just seek a basic
level of service?
There is one last critical step in the Customer Analysis -- showing an
understanding of the actual decision-making process. Examples of
questions to be answered here include: 1) will the customer consult
others in their organization/family before making a decision?, 2) will
the customer seek multiple bids? and 3) will the product/service
require significant operational changes (e.g., will the customer have
to invest time to learn new technologies? will the product/service
cause other members within the organization to lose their jobs? etc.).
It is essential to truly understand customers to develop a successful
business and marketing strategy. As such, sophisticated investors
require comprehensive profiles of a company’s target customers. By
spending the time to research and analyze your target customers, you
will develop both enhance your business strategy and funding success.
About the author:
As President of Growthink
Business Plans, Dave Lavinsky has helped the company become
one of the premier business plan development firms. Since its
inception, Growthink has developed over 200 business plans. Growthink
clients have collectively raised over $750 million in financing,
launched numerous new product and service lines and gained competitive
advantage and market share.
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