Step 1: Determine your Market Size & Share
However your idea is conceived, market research will be necessary to determine its likely success in the eyes of the rest of the world – your potential customers. Entrepreneurs tend to listen to their instincts but hard facts – or at least very strong evidence – will be needed if you are looking for investment.
Estimating an idea’s likely market is key to getting your project off the ground. Prospective investors and business partners usually require reassurance of possible success in order to understand an entrepreneur’s optimism. Amongst their considerations will be market size and probable share in order to estimate the revenue generating scope of the proposed product or service.
It is perhaps easier to sell the potential of something that has mass appeal rather than niche products to a limited market, where the risk of financial failure is higher.
How do you assess your market size and potential share?
For example, you’ve invented a magic widget which prevents vehicle windscreens frosting up and everyone wants one of those!
Starting in the UK, it’s easy to determine the number of vehicles registered, which is the potential market size, but this may be reduced by grouping vehicles owned by the same company or the same family who may share a widget depending on various factors. Also, a number of people who park their vehicle overnight in a garage will not be interested, which further reduces the market size, although it is still quite large. Considering that this product is a seasonal one, the severity of winter conditions and size of car populations in northern territories could also be incorporated into your research.
Market reach & market share
Budget and resources are key factors in reaching the maximum number of potential buyers – and your message has to appeal to the majority, which is no easy task. In order to assess your likely percentage of successful market reach it will be necessary to use a combination of field-work, library resources and market research data which can be found on the internet. You will greatly enhance your chances of success if you can develop a working prototype and demonstrate it to a group of potential customers types using a structured questionnaire.
Finally, you need to consider your share of the remaining market size. For example, what alternatives may prevent people buying your product? There are a number of established inexpensive sprays and scrapers that many people will continue to use. Pricing your product is paramount at this stage – too expensive and people will be slow to come round, too cheap and people won’t be convinced of your amazing claims.
The most successful product in the history of the world will not achieve 100 per cent market saturation. Even today, not everyone owns a smart phone or knows how to use a computer, and there are probably some households without a TV!
Research your market place thoroughly to address the following:
- Will your potential market size and share be big enough? Establishing early on if the market opportunity is too small will mean cutting your losses while they are still minimal.
- Alternatively, if you find that there are greater prospects than originally anticipated, this information will be useful when presenting your case to investors.