10 Ways to Evaluate a Market
Over the years I have seen lots of budding entrepreneurs with bright ideas, but all too often passion and enthusiasm get in the way of good business sense. Before you know it, a whole heap of time and money have been spent on a complete dud. Why? No one wants it.
How do you reliably assess the market for your new venture? I have a ten point checklist to help. It will also help you to determine if the business that you are already in is still relevant
Urgency. How badly do people want and need the product now? Let’s just take an example of building a restaurant. What do you think is the most important thing to have in your restaurant? You might answer, “I’ve got to have good food, good location and a good team.” No. That is not the most urgent issue. The most basic thing that you must have to make your restaurant a success is a hungry crowd.
This is where the internet can really help you. It allows you to search for what people are searching for. It is called a key word search. Google is this amazing device where people put in their problems. If you want to build a great business, all you have to do is to go into Google and type in what problem that you could solve and it will tell you how many people are searching for it. If there are a lot of searches, then it is probably not a bad market to be in.
Market Size. How many people are actively purchasing things similar to what you offer? It is really important to know the statistics about the size of your marketplace. For example, when I worked at Harvey Norman, their company policy would not approve of putting a new store in an area that had less than a drawing population of 100,000. The market size was just too small to support a successful business.
Pricing Potential. How much are people willing to pay? Not how much does it cost to make. That is a profoundly different subject. You have got to ask yourself if a customer is willing to pay $3,000 for the product and the product only costs $50 to make. You should still sell it at $3,000 because that is how much the market is willing to pay.
You also want to operate in a business where there is mystery. Where there is mystery, there is margin. Focus on building a business that is in the area of mystery. If you do not have mystery, try to create mystery in your business. It will help you to increase your pricing potential.
The Cost of Customer Acquisition. How easy is it to acquire a customer? Because of internet marketing, a lot of home based businesses are really thriving. Internet marketing has allowed home based business to prosper. Due to the internet, the cost of acquisition is low because now you do not need to build stores and set up a retail office and pay for all those expensive business start-up costs.
The Cost of the Value Delivery. How much will it cost to create and deliver the value offered both in money and effort? What is the time it will cost to do that? For example, in consultancy based businesses, the time and effort to produce a product is quite high because they are exchanging time for money.
The Uniqueness of the Offer. This is really important. In the sea of clutter, one of the best ways to establish whether you have a really great product or service is to find out if you are truly unique. You do not have to be truly unique; you just have to market yourself as unique. You need to find a unique marketing proposition. You need to figure out what will make you stand out. How will you be different from everybody else? How will you become famous?
The Speed to Market. How long will it take to produce something to sell? Is it going take you a year? Is it going to take you two weeks? How long is it going to take for you to start selling something?
Up Front Investment. How much will you have to invest before you are ready to sell?
Up-Sell Potential. This point is really interesting because up-sell potential works on the simple principle that once you have the customer, can you up-sell to them? Can you say, “Do you want fries with that?” Can you put them onto the mega deal? That assumes that you have another product that you can move them up to. That is why I am not a huge fan of one product businesses. The problem is that if the client does not buy that product, they buy nothing. There is no where to go.
Leverage Potential. Once the initial offer is accepted, how much additional work will you have to put into it to continue selling it? Membership based businesses have a lot of leverage potential because you just replicate over and over the same package that you sell to each of your members. Whereas consultancy or service type business does not have as much leverage potential because they are the product and you cannot replicate yourself over and over.
I hope this gives you some insight into how to evaluate the market if you are about to go into a marketplace or to expand your business. If you go through those ten areas as you would a checklist, you will do some seriously good due diligence.
About Tony Gattari, Achievers Group
The author is founder and Chief Energy Officer of Achievers group. He is a much in demand passionate professional speaker, business educator, author and corporate, business advisor. He has worked with over 140 businesses around the world.
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