As you are trying to figure out what your startup company will build or offer for sale, you need to be sure you can answer the question: Who Will Buy It?

It’s not simply a matter of identifying the target market, you need to be able to articulate who the buyer is, why they will buy your product or service, and how you expect the market to grow.

A few years ago, an entrepreneur was pitching an idea for a startup to an investor client — a device to allow older generation mobile phones to have speaker phone capability. The idea was that this would appeal to many business phone users that wanted speaker phone capability on their cell phones.

During this period of time, speakerphone-capable cell phones were just then beginning to be introduced to the market, so at first blush, there would seem to be a ready market for this product idea.

But there’s a disconnect here: the target market they were trying to sell to, i.e., the business cell phone users that need speaker phone capability — are generally the high-powered successful business person that has no qualms upgrading to newer phone models. So, the question remains: who will buy it?

The other thing to note is that by its very nature, a “retrofit” market is a declining market — there will be buyers as long as there are old phones to retrofit, but as users start to upgrade to newer phones, the market eventually dries up. So while there is a market initially, it’s not a growing market.

Asking investors for money is hard enough. If your primary target market is a question mark and your overall market is shrinking, it will be impossible to convince any investor to bite on your story.

In the end, the entrepreneur ended up using a combination of SBA loans and bank loans to fund the company. I don’t know what this says about the SBA or banks, but I guess it is a good thing that these institutions have different metrics for making their decisions.

But you have to wonder, did they ask the question: Who Will Buy It?

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