Join Mike Figliuolo for an in-depth discussion in this video Sizing the market, part of Creating a Business Plan.
- As you're writing your business plan having a clear understanding of the size of the market is going to help you understand how attractive is the business you're trying to get in to. Does the market consist of businesses, or is it consumers? How many people are in your addressable market? Articulate how does the market organize itself? Is it organized by product, by segment, by problem, is it organized by geography? Spell out some of the common characteristics of the customers in that market.
Now how big is the addressable portion of the profit pool? That profit pool is the dollars that are available in that market and how much of it can the problem that you solve address. Now, some ways that you can size the market are things like, looking at market research, gathering analyst reports, even looking at what some of your competitors are doing and how they've reported the size of the market. A good market sizing will tell you what you need to do to scale your business.
It will also help you understand is this an attractive enough market for me to make a return. You're going to be investing as you build this business, you need to know how much market is out there that you're going to be able to capture. Now obviously bigger markets are exciting, however, niche markets can be just as lucrative. Look at Apple, for example, with high-end laptops, and PCs, and phones, it's a very narrow market when you look at the global market for those products.
However, it's incredibly lucrative for them because their products are properly positioned within that market. So, as you're writing your business plan articulate what the market looks like, and how much of it you think you can capture.
- Defining the problem your business solves
- Determining your product and revenue model
- Understanding customers and the competition
- Developing and delivering your product
- Branding and marketing
- Managing production and operations
- Building and leading your team
- Financial planning
- Avoiding business plan pitfalls