Business Plan Basics

The most important aspect of a business plan is defining the target market. Who's your potential customer?

Demographics Infrastructure Business Models


Two Quechua women and child in Cuzco, Peru
Quechua women and child

Specific characteristics of groups of individuals are called demographics. They include gender, age, education, personal income, ethnicity and nationality. Many people who belong to the same culture share more demographic characteristics than members of a different culture. First the discussion will cover income, education, literacy and ethnicity which are more objective criteria in analyzing any group of potential customers.

Per Capita Income and GDP

Gross Domestic Product is an overall measurement with which to compare economies of foreign countries, but the capacity for their citizens to pay for your product depends on their individual ability to pay. Economists calculate GDP per capita to estimate the amount of national income each inhabitant may use and / or generate. Obviously there is a wide range of income levels among people in any country but from a high level perspective, GDP per capita can help you quickly focus on markets with people who have the capacity to buy your product.



The hereditary group often related to race and national identity to which people belong is another characteristic that affects buying decisions. Although summarizing responses of one group of people based on the actions of a few may be considered stereotyping, it is often useful to generalize reactions of people to chosen stimuli to anticipate the effectiveness of a sales pitch or marketing campaign. As most American companies embrace a broadly diverse workforce and customer base, they also use images of people of different races and nationalities in advertising to convey a feeling of familiarity with the prospective customer. However, many clients find it very uncomfortable to see promotional materials with images of people from different races. Some might consider that prejudice, but it may also be just an honest reaction of a potential customer.



Caption: Modern Culture; Egyptian woman carrying large sack on her head down the street from the grand mosque
Modern culture

What is culture and why did so many different cultures develop? In the simplest terms, a specific culture develops as the result of human need to control society and explain mysterious natural events. Culture includes the type of government a group of people will accept, it includes the religion that explains mysterious events in the past and tries to explain "man's" purpose on Earth. Culture includes a common form of communication which is called language. Culture also includes knowledge passed down through generations about food sources that are healthy and those that may be deadly. Since early man lived and died in relatively small geographic areas, the needs and experiences of one group were very different from those of another group thousands of miles away. The clothing they wore, the food they ate, the relationships they encouraged were all based on mutual acceptance of a common culture. Culture was the foundation of a group's survival.



Verbal and written communication were arguably the most important developments that led to the success of the human race. Where the written language was based on pronunciation of words, many societies and cultures developed because pronunciation changed quickly the further from the source where it originated. The wide variety of European cultures is a good example how many cultures spread across what is considered a small area today. High mountains and dense forests inhibited swift travel between isolated groups of people.

In contrast, the Chinese developed a writing system based on iconography where a character represents a concept rather than pronunciation. Although many forms of verbal communication developed, Chinese emperors were more successful governing large unified areas because the people shared a common written language based on concepts rather than vocalizations. And for anyone familiar with Chinese culture, the pride they express when they write conveys the high value they place on the written word.

Language is also the fundamental means with which people communicate the characteristics of their culture. Germans who were starving after World War II requested shipments of "Korn" from the west to feed their people. The Americans and English shipped "corn" but the correct translation for "Korn" is "wheat". Corn was a staple the Germans fed to the pigs which they considered unfit for humans.



Of all aspects of culture, the belief system that each group develops shapes many other characteristics. Those belief systems then contribute to the definition of what may be defined as acceptable and unacceptable behavior or morals within a cultural context. Cultural and philosophical development have created various relationships between man and his environment. In a simplistic model, a collection of beliefs based on common philosophies may define what is called "religion." It may be arguable that differences in belief systems and religions have been the basis of more violent conflict and responsible for more wars than any other aspect of culture.

For example, how American settlers perceived their "God given" destiny drove many people to explore and conquer vast regions of North America, and in the process annihilate other resident cultures perceived as pagan. Today, divergent interpretations of Christianity contribute to the development of many opposing laws. The current and historical treatment of Muslims by "Christians" over the last 15 centuries have lead powerful extremists to exact revenge on symbols of western civilization. But it is important to understand that most religious groups have factions of extremists but they very rarely represent the belief systems of the members of any religion as a whole. The most successful businessmen will find that accepting that there are differences in belief systems will generate more good will than assuming all customers make decisions based on one set of values. Mutual respect of divergent beliefs is the foundation of understanding your customer's desires.


Gender Roles

No differentiation between people is more obvious than between men and women. Although there are only two genders, the roles that members of each group can perform vary widely from culture to culture. The United States may be progressive with regard to the role of women in society but in 233 years there has never been a female head of state or head of government. The United Kingdom has had multiple female heads of state (queens) but the first female head of government was Baroness Margaret Thatcher from 1979 to 1990. Germany has had a female head of government, Chancellor Angela Merkel since 2005 to the present.

In contrast to the prior examples, it is well known that women in many Muslim cultures, for example the Kingdom of Saudi Arabia, are not even permitted to drive automobiles and have no right to vote. In some countries, the rights have women have changed as a result of revolutions and changes in government, for example in Iran. Prior to the revolution in 1979, women were permitted to wear western style clothing and had the right to vote. But after the Khomeini government (1) took power and a new constitution was written, women were required to cover themselves completely except for their face and hands but retained the right to vote.

Other issues related to the role of women and women's rights include birth control and abortion which remain controversial in many countries. However, in China, for example, the "one child" policy was instituted to slow the rapid expansion of the population which the country could not support. In India, abortion was legalized in 1971 modeled after the laws in the UK.(2) In both the Muslim world and other strongly religious communities, religious values and beliefs overlap with the rights and restrictions of gender roles. Therefore a complete analysis of your target market, must include the effects of religion on gender roles.


Concepts of Time

How a culture perceives time is very complex but less studied than more outward expressions of cultural values. It is no coincidence that the Swiss are renowned for their clocks, watches and other time keeping devices because they value every second. Many Americans are familiar with the unfair stereotype of Mexican culture that Mexican people are lazy and delay work until "mañana" or tomorrow. Such judgemental assessments are based on a fundamental misunderstanding that Mexicans value time in a different way from typical "American" culture primarily inherited from Northern European ancestors. In order to understand other cultures, it is important to recognize that different values are not necessarily wrong or right.

Most cultures can be classified as "past, present or future" oriented. George Santayana was an Spanish-born American attributed with writing "Those who cannot remember the past are condemned to repeat it" in 1905.(3) Such a philosophy recognizes a value to remember the past and use it as a reference to present and future decision-making. It was appropriate for Santayana to express this sentiment to an American audience probably as a suggestion or warning since most Americans fall into the category of "future oriented" or even "near-future oriented." Did you ever wonder why the New York Stock market was so fixated on quarterly performance of commercial entities? How many U.S. companies develop budgets to cover activities over more than one year, and how many companies maintain those plans if the results of one quarter vary from the expectations of the future? Americans are obsessed with planning for the future but not really very far into the future.

Japanese culture also values planning for the future but looks much further ahead than Americans. For example, typical Japanese business plans cover a 5 year time period, and rather than 30 year mortgages that is common in the U.S., Japanese mortgages may cover 100 years. Anecdotes of Americans becoming frustrated with the slowness of Japanese decision-making may be attributed to this difference in values. It is more common for Japanese businessmen to spend a long time developing a relationship because they want to improve the likelihood that the relationship will last a long period of time into the future.

The fluidity of time is another perception of time and people generally fall into one of two categories whether they believe time is fixed or fluid. Americans use expressions like, "you're wasting time" which very clearly reflects an attitude that time is running out or there is a fixed quantity to be used. Cultures like the U.S. and the Swiss view time as "fixed". Let's look at the Mexican example again. When a culture believes time is endless and is "present oriented" there will be a higher value on activities that come once in a lifetime rather than events that have been planned for the future. "Present oriented" cultures with "fluid" time concepts frequently value time spent developing relationships with family and business associates rather than rushing to complete a task.

Cultural concepts of time can cause terrible misunderstandings but they can also lead to unexpected opportunities. When two opposite cultures argue over completing tasks on a schedule rather than implementing unplanned improvements, delays can be costly unless the supplier plans for them in advance. Knowing what your client values may help you determine the best way to bill them. If you expect the client to introduce changes during a project, it would be advisable to bill the client based on the time spent on the project. If your client has a fixed deadline, then you must agree to the full scope of the project in advance and probably request a bonus for early delivery. Billing a client for a project based on the wrong concept of time can likely lead to terrible financial losses; whereas accommodating a client's concept of time could lead to great financial rewards.




(1) U.S. Library of Congress,
(2) Eco India,
(3) Google answers,