If you want to be big, you have to start small. This is especially true for entrepreneurs who are just going to market.

In an ideal world, you’d be able to promote your small business to everyone and, furthermore, everyone would be interested. In reality, marketing to everyone is not only expensive, but ineffective. Even large companies such as Walmart and Starbucks started out by selling to very small, focused markets. And, by doing so, they were able to build up their offering and customer base as the years went by.

Having a clearly defined audience allows you to more effectively and efficiently focus your marketing efforts on the right audiences. But how do you determine your target market? How do you know if you are selling to the right customers?

Analyze the advantage of your product and service
Knowing how the features of your product or service benefit a prospective customer is critical. Who are you trying to help, and how are you helping them? As you identify the benefit to each customer, you may find that they’d be willing to pay more for your product or service.

Observe your current customers
These people are already buying from you for a reason. Look at the characteristics of these customers to determine if there are trends you can identify. Are they all young professionals? Do they work in similar industries? An easy way to organize your current customers is by creating descriptive profiles, which allow you to quickly examine the characteristics of each individual customer, and determine what they have in common.

Look at your competition
If you don’t feel you have a large enough customer base to examine, take a look at who is buying from your most direct or alternative competitors. How is the competition meeting a market need—and furthermore, how are they communicating that they fulfill this need? Even after you’re armed with this information, use caution: Don’t immediately market your product to a competitor’s niche. Instead, you could use this competitive research to find a group or audience that they are overlooking.

Determine your demographic
Who is most likely to buy your product? Think about this in terms of general details such as age, location, gender, income level, education level, marital status and occupation.

Examine the psychographics
What kind of specific characteristics can you draw based on the demographic you serve? Here you want to think in terms of personalities, values, attitudes, behavior, interests and hobbies. Essentially, you want to determine how your product/service will fit into their lifestyle. When will they need your product/service? What features will appeal to them the most? How will you show them the benefits of those features? And finally, what methods will you use to communicate this? For example, if your target customers are constantly online, you will want to make sure you are advertising your business across social media and other internet-based outlets.

Evaluate your market
Once you know who you are selling to, you need to decide if the market is large enough for you to sustain your business and remain competitive. How long will your target group benefit from your product/service? Will they see a long-term need for it? Do you have an understanding of how your target group makes decisions? Is your product/service readily affordable to them? Will it be expensive to reach your market? If you find your ideal customer is actually a very small group, you should go back and re-examine who else might be interested in your product, and be sure to shape your marketing efforts to uniquely fit each niche.

Determining your target market will take time and research. However, focusing on the right target group will pay off in the long run. Keep in mind, narrowing your target market doesn’t mean you are eliminating potential customers. Instead, you are focusing on your most likely customer, which is more effective and efficient than trying to sell the same product/service to everyone.

For more useful tips on getting your venture started the right way, check out JumpStart’s helpful Entrepreneur Toolkit. And don’t forget to sign up for JumpStart for Entrepreneurs, our monthly newsletter giving you more helpful advice along with local success stories and lists of local funding/networking opportunities.