Ten Ways to Evaluate a Market

So often people are working hard at the wrong thing. Working on the
right thing is probably more important than working hard.
—CATERINA FAKE, FOUNDER OF FLICKR.COM AND HUNCH.COM

If you’re thinking of starting a new business or expanding an existing

business into a new market, it pays to do some research before you leap.
The Ten Ways to Evaluate a Market provide a back-of-the-napkin method
you can use to identify the attractiveness of any potential market. Rate each
of the ten factors below on a scale of 0 to 10, where 0 is extremely
unattractive and 10 is extremely attractive. When in doubt, be conservative in
your estimate:

1. Urgency—How badly do people want or need this right now?

(Renting an old movie is typically low urgency; seeing the first showing
of a new movie on opening night is high urgency, since it only happens
once.)
2. Market Size—How many people are actively purchasing things like
this? (The market for underwater basket weaving courses is very small;
the market for cancer cures is massive.)
3. Pricing Potential—What is the highest price a typical purchaser
would be willing to spend for a solution? (Lollipops sell for $0.05;
aircraft carriers sell for billions.)
4. Cost of Customer Acquisition—How easy is it to acquire a new
customer? On average, how much will it cost to generate a sale, in both
money and effort? (Restaurants built on high-traffic interstate highways
spend little to bring in new customers. Government contractors can
spend millions landing major procurement deals.)
5. Cost of Value Delivery—How much would it cost to create and
deliver the value offered, both in money and effort? (Delivering files via
 the Internet is almost free; inventing a product and building a factory
costs millions.)
6. Uniqueness of Offer—How unique is your offer versus competing
offerings in the market, and how easy is it for potential competitors to
copy you? (There are many hair salons, but very few companies that
offer private space travel.)
7. Speed to Market—How quickly can you create something to sell?
(You can offer to mow a neighbor’s lawn in minutes; opening a bank
can take years.)
8. Up-Front Investment—How much will you have to invest before
you’re ready to sell? (To be a housekeeper, all you need is a set of
inexpensive cleaning products. To mine for gold, you need millions to
purchase land and excavating equipment.)
9. Upsell Potential—Are there related secondary offers that you could
also present to purchasing customers? (Customers who purchase razors
need shaving cream and extra blades as well; buy a Frisbee, and you
won’t need another unless you lose it.)
10. Evergreen Potential—Once the initial offer has been created, how
much additional work will you have to put into it in order to continue
selling? (Business consulting requires ongoing work to get paid; a book
can be produced once, then sold over and over as is.)

When you’re done with your assessment, add up the score. If the score is
50 or below, move on to another idea—there are better places to invest your
energy and resources. If the score is 75 or above, you have a very promising
idea—full speed ahead. Anything between 50 and 75 has the potential to pay
the bills, but won’t be a home run without a huge investment of energy and
resources, so plan accordingly.
SHARE THIS CONCEPT: http://book.personalmba.com/ten-ways-to-
evaluate-a-market/
 The Hidden Benefits of Competition

The competitor to be feared is one who never bothers about you at all,
but goes on making his own business better all the time.
—HENRY FORD, FOUNDER OF THE FORD MOTOR COMPANY AND ASSEMBLY-LINE PIONEER

One of the most common experiences of a first-time entrepreneur is

discovering that your brilliant business idea isn’t as original as you’d thought:
other businesses are already offering similar products or services. This would
shake anyone’s confidence—after all, why bother when someone else is
doing what you want to do?
Cheer up: there are Hidden Benefits of Competition. When any two
markets are equally attractive in other respects, you’re better off choosing to
enter the one with competition. Here’s why: it means you know from the start
there’s a market of paying customers for this idea, eliminating your biggest
risk.
The existence of a market means you’re already on the right side of the
Iron Law of the Market, so you can spend more time developing your offer
instead of proving a market exists. If there are several successful businesses
serving a market, you don’t have to worry so much about investing in a dead
end, since you already know that people are buying.
The best way to observe what your potential competitors are doing is to
become a customer. Buy as much as you can of what they offer. Observing
your competition from the inside can teach you an enormous amount about
the market: what value the competitor provides, how they attract attention,
what they charge, how they close sales, how they make customers happy,
how they deal with issues, and what needs they aren’t yet serving.
As a paying customer, you get to observe what works and what doesn’t
before you commit to a particular strategy. Learn everything you can from
your competition, and then create something even more valuable.
SHARE THIS CONCEPT: http://book.personalmba.com/hidden-
benefit-of-competition/