How To Evaluate A Market
How To Evaluate A Market
Often time people work so hard at the wrong thing. Caterina Fake, the founder of Flickr.com suggested that working on the right thing is probably more important than working hard.
If you are starting a new business or expanding an existing business, it’s important to carry out a proper market survey to obtain the profitability or otherwise of the business.
Here, I will provide you with a back-of-the-napkin method to used to evaluate whether a market actually exists for your plan business.
Further, rate each of the factors explained below on an imaginary scale of 0-10, where 0 depict that the business idea is extremely unprofitable and 10 very profitable.
How To Evaluate A Market
Before you leap, nay embark on any new business, you need to properly survey how badly people need or want the product or service you tend to offer.
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2. Market Size:
If actually there is a need for your product, how many persons actually need it? How many persons are buying a thing of that nature currently. In other words, how many persons will be willing to deep hand in their pocket to patronize you? A profitable business excels more where there is a large market.
You need also to consider the future relevance of the product or service you intend to offer.
3. Price Potential:
As far as business is a concern, your product or service is a solution to someone’s problem. Therefore, you have to find out how much or the highest price a prospective customer would be willing to pay for what you offer. This will assist you to know the best pricing method to adopt.
4. Cost of Customer Acquisition:
The survival of every business depends on its customer base. As such, you need to know how much resources; money, time, and effort it will cost you to generate sales from your offering. Take for instance; a restaurant build on high traffic environment
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5. Cost of Value Delivery:
How much would it cost you to create and deliver the offer? If it’s a physical product that requires a manufacturing plant, how much would it cost to build one? How much will it cost to create an eBook, if the product is a digital one? These questions and many more you should ask yourself and weigh yourself against the profit margin to be drive from the business.
6. Uniqueness of Offer:
How unique is your offer against other providers of the same or similar product or service in the market? Having a market monopoly for a particularly profitable product for as long as one can maintain is a very good idea. Hence, you should consider how to make that a reality. Would your product be difficult to replicate? If yes, your chance of monopolizing the market is minimal.
7. Speed to Market:
If your product is unique and in dire need by a large number of persons, how easily can you make the offer available to your prospective customers? Think of a bank business for instance. Putting up the structure and organizational structure may take forever. So, you have to know whether the idea would take forever, before materializing into the available market.
8. Upfront Investment:
One major aim of every business-minded person is to make profits and minimize the risk of losing out. You shouldn’t be an exception to this. That is why you need to consider how much you have to invest in the business before you can start to make a sale. To mine for gold, you need millions of naira to purchase the equipment and other things that will be needed for the operation. Are you ready for that?
9. Upsell Potential:
Your aim is to satisfy the customer’s wholly. Therefore, from your business idea, are there other products or services (secondary to your business) that you can offer to your buying customers? Take, for instance, a consumer who buys bread is more likely going to need Chocolate and Milk. So, are there other products that you can leverage on to satisfy the insatiable needs of your customers?
10. Ever Green Potential:
Once your business idea has been created, how much additional work will be required of you to put it, in order to continue making a sell? Some products require continuous attention. For example, a book can be produced once and sold over and over again without requiring your attention. Whereas, a consulting business requires you to rapt attention to it.
Conclusion On How To Evaluate A Market,
When you carefully rate your idea on the scale of 0-10 you would have an understanding of whether there is an existing market for it, or that you need to create a market for yourself.
Once there is an unmet need – there is a need to fill that gap. However, you should also consider the percentage of people having that unmet need, because, you would not want to establish a business with few customer bases. Although, having a huge customer base doesn’t necessarily alone tell the profit nature of business. All said, considering the price your customers are willing to pay removed from the expenses you will undergo in getting customers, production of the product and maintenance is paramount.