Why Do You Need a Market Opportunity?
It’s not easy to plan a business. And, it is a waste of time to plan a business around an idea that has no chance of success. You need to find a market opportunity that can support a business. So, instead of rushing in to plan your business, step back and first evaluate that business idea and see if it is worth pursuing.
A market opportunity with sales potential exists when there is a critical mass of customers with unmet needs who will spend significant sums to satisfy those needs. When the sales revenues generated by these customers is sufficient to support a business, you have discovered a market opportunity with profit potential.
The focus of a market opportunity evaluation is on sales. While expenses are also a determining factor in projecting business profits, they are generally easier to estimate and they often depend on sales estimates. Therefore, it makes sense to develop a sound estimate of sales before investing time in estimating expenses. And, it certainly makes sense to develop a sound estimate of sales before planning out your business.
The Seven Steps to Finding a Market Opportunity
So, how do you find a market opportunity with sales potential?
Simple, it takes some time, access to the Internet, and knowing what to do. Here are the seven steps to complete.
- Become familiar with your industry, its current situation concerning growth and the trends to expect in the future.
- Choose a target customer to serve and market area where you will first pursue that customer. (Your choice doesn’t have to be the perfect choice. It just has to be one you are willing to spend your time evaluating.
- Analyze the nature and strength of the competition in your market.
- Analyze the needs and motivations of your customer. Identify their core needs and desired experiences.
- Design an offering that will deliver features that address core needs and desired experiences.
- Market test your offering with a sample from your target market group to evaluate the strength of demand.
- Develop a sales projection based on your market test and evaluate whether or not revenues are likely to be sufficient to cover costs and leave a profit for your business.
While this type of evaluation is still a lot of work, it avoids the work involved in preparing detailed estimates of expenses, cash flows, and engaging in other types of planning activities that make sense only if you are confident that your idea will succeed.