The best entrepreneurs are always planning their next move. Here are a dozen tips to help you quickly assess market opportunities and determine where to strike next.
Is the market you’re targeting really a viable opportunity? Whether you’re an entrepreneur starting your own business or an executive at an expansion-stage company focused on growth, you need to be able to answer that question quickly and definitively. That is where mastering the art of market sizing comes into play.
Being able to estimate the potential dollar amount of any given market or market opportunity is crucial to a variety of business decisions, from prioritizing your target market segments to evaluating the impact of a new product launch or expansion to assessing a partnership or acquisition opportunity.
In any case, by effectively collecting and gauging the right data, you can significantly improve your strategy and decision making.
12 B2B Market Sizing Tips for Assessing Market Opportunities Quickly & Effectively
- Break the market opportunity into segments. By limiting your focus you can develop more realistic assumptions about specific need for your product/service, as well as address-ability, competition, and the size of the revenue opportunity. Neglecting to do so will lead to inaccurate assumptions and will increase the likelihood of producing misleading results.
- Make sure prospects in a segment actually want the same thing. Before getting too deep into an assessment, you need to verify that the prospects within a given segment have similar needs and will value your product in the same way. Otherwise, the granularity will not improve your evaluation of the opportunity. In some cases, it may even hinder it.
- Remember that all segment criteria must be externally visible. The benefit of going with geographic, industry, and company size factors is that it will enable you to do some of the quicker one-off, top-down sizing approaches.
- Make sure not to get too granular with the segments. In order to be a viable market segment, a company needs to be able to develop a go-to-market strategy around the segment. So the expected revenue potential must be large enough to warrant that.
- Focus on the larger segments. These are the ones that are going to have the greatest impact on an overall market opportunity assessment and the only ones that you will likely want to target in a specific opportunity assessment.
- Spend your time estimating and validating assumptions that will have the most significant outcome on your estimates. You want to test the assumptions that will completely change the outlook of your assessment, not ones that will slightly move the needle.
- Define the relevant timeframe for the market opportunity. This is incredibly important as some opportunities will not be immediately addressable. Those opportunities need to be discounted and in some cases excluded from your estimates.
- Determine whether any opportunities are Greenfield opportunities. A blank slate certainly suggests opportunity, but keep in mind that may also mean a longer and more costly education phase during the sales process to take advantage. That will drive out the time for realization of the opportunity.
- Identify any requirements or preconditions. For example, you will want to quickly look and see whether the opportunity is dependent upon a law being passed or a specific milestone set-out in an ordinance. If it is, you may want to avoid looking at these subsets of opportunities altogether. It depends on why you are addressing the market opportunity in the first place.
- Identify if there are any obvious product development requirements that will preclude you from addressing the segment immediately. If there are, you may want to avoid looking at these subsets of opportunities, too.
- Watch out for double counting, especially if you are using a top-down approach. If you are doing a rough estimate, you may even want to apply a discount factor to try to remove this effect.
- Be careful when estimating segments with limited customers. Segments with only a couple of deals will sometimes not be fully representative. Consequently, assessing them can lead to unfair assumptions in terms of needs and value for a given product or service. It is important to take the extra step to really validate the needs and potential value for these types of opportunities.
Free Presentation: How to Size a Market Opportunity — Fast
- The Science of B2B Market Sizing
- 8 B2B Market Sizing Approaches to Quickly Assess Market Opportunities
- Market Segmentation is Hard — How to Make it Work
Photo by: Giacomo Carena