Category: Target Market

What Billions Can Teach Entrepreneurs

You Weren't Ready

I frequently work with start-ups. Sometimes as an advisor. Sometimes a supplier. Often, I’m asked to invest or help raise money. As I review pitch decks, I see the same theme repeatedly. Entrepreneurs, in love with their “baby,” focus too much on their product and how it’s going to “Uberfy” an industry. Unfortunately, they missed the critical elements investors target (in order):

  • They haven’t found a product-market fit.
  • They haven’t formed a team with proven success in that industry
  • They don’t have a command of the competitive matrix or their intersection
  • They don’t have command of their financials and, more critical, ratios.

Traction trumps team… Team trumps product.

One of the only television shows I watch is Billions, starring Damian Lewis as Bobby Axelrod, on Showtime. In one episode, Axe’s wife, trying to raise a round of funding for her new venture, has negative experiences with potential investors. Axe adroitly explains why she’s not ready:

“What is it you do that you’re the best in the world at? You offer a service you didn’t invent, a formula you didn’t invent, a delivery method you didn’t invent. Nothing about what you do is patentable or a unique user experience. You haven’t identified an isolated market segment, haven’t truly branded your concept. You need me to go on?

So why would an investment bank put serious money into it? I all but told you that ahead of time, but you wouldn’t listen. Now you’ve heard it, but it’s too late. You. Weren’t. Ready.

Stop Wasting Your Resources!

Today you’re going to learn how to find a target market of potential customers so you aren’t wasting precious resources on blitz marketing. So, the two questions you have to ask yourself are:
  • What do people really want to buy from me?
  • What related products are they already buying?
Once you figure this out you will know who is more predisposed to purchase your products/services. Then, you find other businesses with the same customer base who you can customer share with. Come up with an incentive and great arrangement to encourage both of your customer bases to shop at both of your stores. The basic concept is this: You want to find existing businesses who have the customer profile that you are looking for to market your products/services to. Then strike up a relationship with those business owners to work out an incentive for customers to purchase from both businesses. As a result, you have an audience to market to and they generate an added value from their current base. So, how do you figure this out? There is a great formula from Jay Abraham you can follow with great success. LV = (P x F) x N – MC Here’s what it all means:
  • LV is the life time value of a customer
  • P is the average profit margin from each sale
  • F is the number of times a customer buys each year
  • N is the number of years customers stay with you
  • MC is the marketing cost per customer (total costs/number of customers)
Once you know how much you need to spend to attract a new customer, you will know how much of an incentive you can offer to a business to help attract new customers. So, here’s your step-by-step process:
  1. Find companies who already have the customer base you are looking for.
  2. Negotiate an incentive for them to share that customer base with you.
  3. Focus your marketing resources to this group of predisposed customers.
If you need help working through this process, please contact us and we’ll set you up with the most comprehensive system of marketing tools and resources.