This section identifies your target customers and explains why they’ll buy your goods or services rather than the competition’s. You need to provide a detailed profile of your primary client. And you need to explain precisely how you intend to beat the competition.

When identifying your target customers, hone in on specifics. A convincing business plan proves that you know your customers—their wants, their needs, their buying habits.

For instance, if you’re a freelance graphic artist, theoretically your clients could be anyone who needs artwork. That’s too general. Be more specific. Maybe your focus should be local advertising agencies with overflow work or association magazines or in-house newsletters for manufacturers.

Depending on your type of business, here are other questions you might need to answer:

• Where do your customers live or conduct business?

• What competitive products or services are they buying now?

• How many potential customers are there?

• What do your customers like—fast turnaround, personal    service, low prices, convenient location, long-term business relationships? 

• What do your customers dislike—products that don’t perform as promised, contractors who don’t deliver on time?

• How frequently do customers buy the goods or services you’re offering?

• Is the market for your goods and services growing or shrinking?

In the real world, competition for your customers is fierce. You need to know the competitors as well as you know your customers. And you’ve got to devise ways to beat them.

To identify your competitors you can ask suppliers, read trade journals, search the Web, attend trade shows and look at advertising in the publications that your target customers read. If your business depends upon local trade, check out the competition geographically.

Once you identify your top competitors, look specifically at what they offer customers. What goods and services do they provide? What’s their pricing strategy? How do they market their product or service? What level of customer service do they provide?

As you find answers to these questions, you’ll start to develop a picture of the competition and you’ll begin to see areas of opportunity for your business. Can you offer lower prices to attract customers? Can you beat the competition with a more convenient business location? If you offer a more complete array of services, will customers come to your company? Is there a niche market of customers not being served by your competitors?