Many new entrepreneurs believe their service or product will have wide market appeal. As a result they overestimate their market opportunity and accordingly their company’s potential for growth. So you need to ask yourself: what’s my market opportunity — really!?
It’s important to keep in mind that your business can’t be all things to all people. No matter how broad you consider the appeal of your product or service, not everyone will be interested in it. That’s why you should be able to identify the appropriate niche for your business—your “sweet spot.” In others words, who is your ideal customer? Defining your niche helps you establish what your real market opportunity is, and will prevent you from making costly mistakes.
To define your market opportunity, start by obtaining a global overview of the overall market potential. How large is the industry, and what are the current trends? For example, the American Pet Products Association said that, in 2010, Americans were projected to spend about $47 billion on their beloved companions. And it is anticipated that the pet industry will grow at about $2 billion annually. Those projections demonstrate a strong industry, and that should bode well for you if you’re venturing into pet-related products or services.
Once you have the broad picture, try to establish how much of the overall market you might be able to capture. Your target market — or sweet spot — consists of the customers you believe are most likely to buy your particular product or service. For example, your ideal customer or client may be a dual-income family with a household income of over $100,000, two children, and either one or two pets. Utilizing census bureau information or other reference material, you should be able to estimate the number of families in your area that fit that description. That becomes your market opportunity.
To find the information you need, do an online search for industry data. Trade associations are also helpful. In addition, here are some sources of useful information:
- Research companies such as Dun & Bradstreet, Standard & Poor’s Investor Services, and the Risk Management Association all publish directories and industry surveys.
- FedStats is a website that provides statistics from more than 100 agencies.
- The U.S. Department of Commerce provides demographic statistics on American families.
- Your local Chamber of Commerce and economic development council may have helpful demographic information for a local region.
- Small Business Development Centers (SBDCs) are excellent resources to assist you in defining your market potential. They have access to both federal and local demographic statistical information.