From The $100 Startup · Part I, Chapter 5

The New Demographics

"Business opportunities are like buses — there's always another one coming."
— Richard Branson

I keep saying "customers" and "clients." A reasonable follow-up question: who are they? And just as importantly, where are they, and how do you find them?

You can try to fit your ideal customers into traditional demographic boxes — age, gender, income, zip code — and the marketing textbooks all say you should. Sometimes it helps. Often it doesn't.

The "target market" question

When I was writing my first book, people in the publishing industry kept asking me about the "target market" for the community my blog had built. I'd been in business a while, so I knew what they meant. I just couldn't figure out how to explain it.

We had artists, travelers, high-school students deciding whether to go to college or strike out on their own, retired people planning a next chapter, and everyone in between. Some entrepreneurs and self-employed folks; plenty of people in traditional jobs. The gender ratio was roughly even.

Finally I realized the target market wasn't a demographic in the conventional sense. It was a set of values — people from all backgrounds who wanted to live unconventional, remarkable lives. Pro-change. Interested in pursuing a big dream while also making the world a little better. None of those traits show up on a census form.

For most microbusinesses, the useful split is between two ways of grouping the people you serve:

Traditional demographics	New demographics
Age	Interests
Location	Passions
Sex / Gender	Skills
Race / Ethnicity	Beliefs
Income	Values

You can use either column. The new-demographics column is more useful for most of the businesses in this book.

Kinetic Koffee: targeting the outdoors, not the age bracket

In Arcata, California, husband-and-wife team Mark Ritz and Charlie Jordan run the Kinetic Koffee Company. KKC is a gourmet microroaster that makes great coffee. But there's no shortage of great coffee in California, so they needed something more.

KKC found its footing by targeting a specific group: cyclists, skiers, backpackers, and "pretty much anyone who enjoys the outdoor lifestyle." That positioning set them apart in a crowded market. The age, gender, and income of any individual customer was incidental — what mattered was the shared interest.

The connection is natural. Before starting KKC, Mark spent most of his career in the cycling industry. Charlie was VP of a kayak company. Both were active in racing and recreational communities. Both drank a lot of coffee. The two passions converged.

"We weren't the first coffee company to target the cycling market," Mark told me, "but we were the first to look at the market from the perspective of the bicycle shops and outdoor dealers. We have now outlived a number of better-financed companies who have since left the market."

To reach outdoor enthusiasts, KKC works with bicycle shops and outdoor stores. The distributor relationships get the coffee into almost every store in the country. Mark complements that with trade shows and consumer events. KKC donates 10% of profits to outdoor causes every year. It's a low-six-figure business.

The Grateful Dead figured this out in 1967

The internet has made it easier to connect with people based on shared values, but the principle isn't new. Long before Facebook, a band with an underground following built a community of fans across generations. Here's Jerry Garcia on the Grateful Dead's audience:

There's a lot of that stuff with people bringing their kids, kids bringing their parents, people bringing their grandparents — it's gotten to be really stretched out now. It was never my intention to say, this is the demographics of our audience. It just happened.

Tom Bihn, the bag manufacturer in Seattle, says something similar: "We're consistently and pleasantly surprised by the diversity of our customers. People have a natural desire to categorize and quantify, but we've always felt doing so with our customers would be pointless. They're students, artists, businesspeople, teachers, scientists, programmers, photographers, parents, designers, farmers, and philanthropists."

Sometimes you change the "who"

Kris Murray, a busy working mother in Hudson, Ohio, saw an opportunity in helping childcare providers run their businesses better. For years she worked at building relationships one by one with daycare centers — and got steadily more frustrated. The centers had low budgets, low willingness to invest, and limited interest in growing.

The early days were rough. She was exhausted, overwhelmed, and ready to quit. Then she changed two things.

First, she streamlined her services around what clients clearly wanted — she gave them the fish instead of trying to teach the broader business education they didn't want.

Second, she "changed the WHO." Many small daycares were themselves microbusinesses run by one or two people. Even if they provided good childcare, they couldn't afford much in the way of consulting. So Kris pivoted to a different audience: multi-location center owners. These owners had real businesses, real budgets, and a real interest in growth.

Her income went from "doing OK" to over $20,000 a month. She fixed the problem by changing both what she offered and who she offered it to. The product didn't have to change much. The audience did.

Strategy 1: Latch on to a popular passion or craze

Popular diets come and go. A few stick around. The Paleo diet — eat a lot of meat and vegetables, none of the grains, dairy, or sugar — looks like one that's here to stay. Like all strict diets, it attracts a passionate following and an equally passionate group on the other side that questions the science. An industry with lots of lovers and haters is a good business signal.

Jason Glaspey adopted Paleo after reading the main book on it. He noticed a real difficulty: the diet is conceptually simple but logistically complicated. To actually follow it requires ongoing planning. That's the second good business signal — when lots of people want something but struggle to implement it.

Jason built Paleo Plan as a one-person business in three weeks for $1,500. The product told people exactly what to buy, cook, and eat each week. Within a year, it was earning $6,000 a month in recurring revenue and required two hours of work per week to keep updated.

Strategy 2: Sell what people buy (and ask them if you're not sure)

Old-school marketing is based on persuasion — knocking on doors, talking people into buying something they didn't ask for. New marketing is based on invitation. You build a tribe of people who actually want what you offer, and when you make something new, they're ready to buy before you finish announcing it.

The second part of "selling what people buy" is asking them what they want. When brainstorming an idea and you aren't sure what's best, ask your prospects, your current customers (if you have them), or anyone you think might fit your customer profile. Be specific. "Do you like this?" is useless. "Would you pay for this?" is the right question.

Three open-ended starters work well for almost any market:

Fill in the blank with the specific niche you're researching: "What is your biggest problem with getting things done?" or "What is the #1 question you have about online dating?"

The open-ended answers regularly surface problems you didn't know existed. They also build momentum toward a launch — people who answer the survey feel invested in what comes next.

Once you have a few product ideas, you can take this further. I'll write to my list and say:

Here are a few projects I'm thinking about working on during the next few months, but I could be wrong. Please let me know what you think of each idea.
Idea #1...
Idea #2...
Idea #3...

I attach a simple ranking scale: I love it! You should do it / Sounds interesting / Would need to hear more / It's not for me. Keep the survey to under ten questions. Lower question counts get more responses; higher counts get fewer-but-deeper. Pay close attention to feedback — it either confirms your direction or sends you back to the drawing board.

One caveat: the majority opinion isn't everything. You need your own motivation to sustain a project over time. If you build only what the survey says, you'll end up bored, unhappy, or running someone else's business by committee. Use the data. Then use your judgment.

The customer is often wrong

It was a big launch day. I was up at 5am with coffee, watching the cart fill up. By noon, more than 1,000 people had purchased. The number doubled by end of day. I sent so many thank-you emails that Google briefly shut down my account, thinking I was a spammer.

In the inbox: hundreds of excited new customers and dozens of small support requests. And one note from Dan: "I'd like a refund."

I wrote back quickly: "No problem. What's wrong?"

"Let me give you some free advice," Dan wrote, in a tone that wasn't subtle. "Give me a call and I'll tell you how you lost my business."

I looked at the cart — orders and excited messages were still coming in by the minute — and replied to Dan. "Sorry, I can't call you. I'll issue the refund and I wish you well, but I don't need any advice right now."

The expression is "the customer is always right." Most small-business owners discover quickly that this isn't true. You want to meet people's needs and go above and beyond when you can — but any single customer doesn't always know what's best for your business. Sometimes they're not the right customer for your business, and there's nothing wrong with saying so and moving on.

I might have missed something by not calling Dan. I'm pretty sure I'd have missed more by leaving my core market waiting while I talked him down.

The possibilities list and the decision-making matrix

When you start thinking like an entrepreneur, you'll have more ideas than time to pursue them. Two responses help. First: capture all the ideas in one place — a "possibilities list" — so the ones you skip aren't lost. Second: find a way to evaluate competing ideas systematically.

Baseline test for any idea:

• Does the project produce an obvious product or service?
• Do you know people who will want to buy it (or where to find them)?
• Do you have a way to get paid?

If any answer is "no," go back to the drawing board. Assume all three are "yes" and you still have more ideas than time. That's where the matrix comes in:

	Impact	Effort	Profitability	Vision	Total
Idea #1	—	—	—	—	—
Idea #2	—	—	—	—	—
Idea #3	—	—	—	—	—

List ideas down the left. Score each on four criteria, 1–5:

• Impact — How much of an impact will this project make on your business and customers?
• Effort — How much work will it take? Lower score = more effort. A 1 means it'll take forever; a 5 means it's quick.
• Profitability — Relative to the other ideas, how much money will it bring in?
• Vision — How well does it fit your overall mission?

Add the rows. You're looking for trends, not precision. Drop the lowest-scoring idea. Start on the highest. Here's how it looked when I ran the matrix on my own projects for the second half of 2011:

	Impact	Effort	Profitability	Vision	Total
Publishing Guide	4	3	3	5	15
Empire Building Kit	4	2	5	4	15
Community Webinar	3	4	2	3	12
Shopping Cart Project	3	3	3	3	12
Small Live Workshops	4	1	1	4	10

The small live workshops would have a big impact on the few people who attended — but they'd require a great deal of prep time and not bring in much revenue. The matrix didn't tell me to drop them; it told me they were the obvious thing to defer.

What happened to James Kirk and Jamestown Coffee

Back in Chapter 1, James Kirk had just moved from Seattle to South Carolina and opened the coffee shop he'd been planning for six months. As he settled in and got to know his customers, he made a few changes.

"I learned there was no way you could have a breakfast place down here and not sell biscuits," he said. "If you had told me my coffee shop would sell biscuits, I would have laughed." He also sold a great deal of iced tea — year-round — which would have been a hot-summer-only thing in Seattle.

He adapted quickly, deciding which parts of the operation were flexible and which weren't. He could add biscuits and ramp up iced tea. He wouldn't compromise on coffee-bean freshness or the espresso preparation he'd learned in the Pacific Northwest.

This is what new demographics looks like in practice: paying attention to what your actual customers want, not what you assumed they'd want, and being willing to change what you sell to fit them — without changing what makes your business worth showing up for.

Key takeaways

• Who are your people? You don't have to think of them in categories like age, race, or gender. Shared beliefs and values often work better.
• Latch on to a passion or craze. When lots of people are interested in something but struggle to do it, that's a business opportunity.
• Ask your customers what they want. Open-ended questions ("What's your biggest problem with X?") outperform multiple-choice surveys. Cap the survey at ten questions.
• Use the decision-making matrix. When you have more ideas than time, score them on impact, effort, profitability, and vision. The exercise surfaces the obvious cuts.
• The customer is often wrong. Listen carefully — but trust your judgment about whose feedback matters and whose doesn't.

Where this fits in the book

"The New Demographics" closes Part I (Unexpected Entrepreneurs) and bridges to Part II (Taking It to the Streets). Part I has established who these founders are, what makes them tick, and how they think about customers and ideas. From Chapter 6 onward, the book turns to the mechanics — business plans, offers, launches, promotion, and money.

The decision-making matrix in particular shows up again in Chapter 6 when we look at how to test ideas before building them.

Frequently asked questions

What are the "new demographics" in The $100 Startup?

Traditional demographics describe who someone is on a form (age, location, gender, race, income). New demographics describe what they care about (interests, passions, skills, beliefs, values). For most microbusinesses, the new version is more useful for finding and serving the right customers.

How do I find my target market for a small business?

Start with values, not demographics. Ask: what do my best customers care about? Where do they spend attention? Kinetic Koffee Company found that "outdoor enthusiasts" was a more useful description of their market than any age-and-gender breakdown. They went where the cyclists already were.

What questions should I ask in a customer survey?

Three open-ended starters: "What's your biggest problem with [topic]?", "What's the #1 question you have about [topic]?", and "What can I do to help you with [situation]?" These uncover problems you didn't know existed. Keep total surveys to under ten questions for the highest response rate.

How do I decide between several business ideas?

Use the decision-making matrix. List your ideas, score each on impact, effort (low = high effort), profitability, and fit with vision (1-5 each), and add them up. The scoring is subjective but the exercise surfaces patterns. You're not looking for the "right" answer — you're identifying the obviously-wrong ones to defer.

Where does this fit in The $100 Startup?

Chapter 5, the final chapter of Part I (Unexpected Entrepreneurs) and the bridge into Part II. It answers two practical questions — who are your customers, and which idea should you pursue — before the book turns to the mechanics of business plans, offers, launches, and growth.