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Before we go over some tips for narrowing your addressable market into a concise target market, lets first define these terms.

Addressable Market

The addressable market is the group of people (or businesses) whom might be interested in what you are selling.  It is the broadest umbrella of potential customers that your target or service may be suited for.

Target Market

The target market are those people (or businesses) within your addressable market whom are most likely to buy from you.  Typically, they are the lowest hanging fruits and therefore the cheapest to acquire.

Narrowing Your Addressable Market Down to Your Target Market(s)

It is important to have both an addressable market and a target market when writing a business plan.  Your addressable market will give the reader (potentially investors) a good understanding of the potential market opportunity should this business take off.  However, do not stop here.  Many entrepreneurs make the mistake of only looking at the big picture when defining their market.  Investors know – and so should you – that a start-up cannot be everything to everyone.  Startsups have a lot going up against them: no market awareness, tight sales and marketing budgets, steep competition, etc.

As a result, you will want to target a strategic set of market segments within your addressable market.  The low hanging fruits – those most likely and able to buy – will probably want to be your initial focus as these will cost the least amount of money to acquire, thereby leaving sales and marketing dollars for other segments.

A Note on Core Competencies

When determining both your addressable and target markets, keep your core competencies in mind.  You may be able to make moderate tweaks to your product or service to make yourself attractive to a new segment.  This may or may not be in your best interest.  Just be sure to stay focused on what it is you do best and determine the audience that most needs your solution to their problem.
 

Whether you have a question about your Addressable vs Target Market, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

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