Look Before You Leap (Market Sustainability)

October 18th, 2010 by Marcus Tewksbury

Yes, there is a successful formula for transforming your approach to the marketplace by arming your marketing, social, and pr teams with a sales mindset that can give you unfair competitive advantage. That doesn’t mean, however, that you should be targeting all marketplaces.

Before you make that commitment you need to make sure the marketplace in question is financially viable. One of the first questions you need to answer is how big the proposed market for your offering is. Keep in mind this isn’t a mathematical proof you are trying to solve. You just need to develop a rough estimate that justifies the costs and time associated with targeting a new space.

If the space is full of large, publicly traded firms the effort is pretty straight forward. Create a list of likely suspect, folks you could see yourself selling to one day, and then bump it up against their financials. The main numbers you want to focus on are the top-line revenue and the expense line that most closely matches your offering. Selling marketing software to a retailer? Then you probably want to look at SG&A. Or maybe it’s bananas to a pie shop? Then it would be COGS. Either way, what you are trying to capture is an idea of how much the proposed market is spending in your area.

Things get trickier when approaching smaller, closed markets. The first thing you need to do here is identify some citable data points. Can you source pricing information? Find references to margin or spending norms? Or details on organization size? To create any type of effective model you need to have some solid stakes in the ground. When you start modeling, you start making assumptions. Having known quantities helps minimize the impact of widely missing the mark on individual assumptions.

Again, when making this assessment what you are trying to evaluate is if the marketplace has enough volume to cover your expense and make it worth your while to pursue. Even if your models are flawed, you will be amazed by the new perspective this sizing effort gives you. Many times you will find yourself just knowing whether the market can bear your weight.


•    Health of a marketplace is an important consideration
•    Exceptional demand is meaningless without the ability to pay
•    Do identify some concrete measures
•    Don’t build a definitive model just a rough justification


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