By Ed McLaughlin and Wyn Lydecker
How will you assess the market opportunity for your new business? Success stories like Nike, Apple, and Tesla show that the greatest opportunities lie in industry sectors that are growing and changing. You, too, will benefit from knowing your market, fully understanding the business you are in, and evaluating and quantifying your market opportunity.
Know Your Market
Look beyond the market that seems self-evident. Ty Montague’s Inc. article, The Key Innovation Question: What Business Are You Really In?, challenges entrepreneurs to look beyond the obvious. He said, “Nike isn’t in the shoe business. Nike is in the business of inspiring the athlete in all of us…Tesla is not in the car business. Tesla is in the business of electric mobility. Red Bull isn’t in the energy drink business. Red Bull is in the business of helping us live our lives to the absolute extreme.”
Consider the advent of the iPhone. Apple realized they weren’t just in the mobile communications business; they were on the cutting edge of the mobile lifestyle business – serving customers that were less defined by geography and more defined by versatility. The iPhone wasn’t just a cool new device; it served the changing lifestyles of its users. In Jake Nelson’s Innovation Excellence article,Four Types of Innovation and the Strategic Choices Each One Represents, he points out how iPhones introduced during Apple’s Steve Jobs-era answered the call of the marketplace. The iPhones introduced simplicity, functionality and power, and they put “every other phone on the market to shame.”
When you think about your market opportunity, move beyond the boundaries of straightforward, basic assumptions. Enlarge the way you assess the world in which your future customers exist so you can understand the call of the market, how your product or service will influence it, and the fullness of your potential opportunity.
8 Questions to Demonstrate Your Market Opportunity
The answers to the following key questions will give you a solid understanding of your real market opportunity. Your answers will also enable you to quantify the size of the total market and the specific sector you will enter. This information will be critical for your own business planning and for sharing with potential investors.
- What industry is your business in?
- What sector of the industry are you targeting?
- What changes are taking place?
- How does your product address the changes?
- How can your product create change?
- What is the size of the market and your target sector?
- What is the growth rate of the target sector?
- What trends will impact the rate of growth?
When you research the answers to these questions, remember that it is important to stay at a high level. You don’t want to get mired in minutia. All of your answers should be available to you through online sources, industry groups, libraries, competitors, and business owners in the same sector.
If you start your business with your eyes wide open to a full understanding of your market and the opportunity it offers, you will give yourself firm footing in this vital aspect of business planning before you launch.
Ed McLaughlin is the author of the upcoming book, The Purpose Is Profit: The Truth about Starting and Building Your Own Business, along with co-authors Wyn Lydecker and Paul McLaughlin. The Purpose Is Profit (Greenleaf Book Group) will be available in bookstores on August 2, 2016.
You can download a complimentary excerpt, “The Ten Commandments of Startups Profit,” here.