Assess the Value of a Market Opportunity

You would never dive into a body of water without the first testing the depth. Too shallow and you might break your neck. Similarly, you should never dive into a new market or potential opportunity without first assessing the value to your organisation. There are 10 factors you can and should consider. Your assessment of these 10 factors will inform you on the wisdom of pursuing it as an opportunity.

Score each of these factors from 1 to 5 (1 is extremely unappealing up to 5 as highly appealing):

  • Market Size—is there significant numbers of purchases of products or services similar to this? For example, the market size for soft drinks is enormous; the market size for luxury treehouses is minimal.
  • Pricing—what is considered the optimum price a typical client will invest in this product or service? For example, paper clips sell for pennies; aeroplanes sell for millions.
  • Cost of customer acquisition—what does it take to acquire a new customer? What will be the typical cost to generate a sale considering resources such as time and money? For example, fast food stores have a low average spend to acquire new customers; skyscraper construction firms may invest hundreds of thousands or even millions to win new projects.
  • Cost of value—how much will be required for you to create and deliver the value offered, considering resources such as time and money? For example, delivering fruit from the market to the retail stores costs only pennies apiece; inventing a product, or building a cruise ship may cost millions.
  • Urgency—how great is the desire for customers to want this product or service now? For example, purchasing an iPhone 5 as a backup handset is a low priority compared to securing opening night tickets for the farewell concert of a retiring musician.
  • Uniqueness—how fundamentally different or unique is your product or service in comparison to others in the marketplace? How quickly or easy will it be for competitors to imitate your offering? For example, there are many cruises you may choose to take; only Richard Branson is currently offering commercial passenger space travel.
  • Cost of creation—how much will you be required to invest in research and development, testing, product development, marketing, etc., before you can offer the product or service for sale? For example, to become an Uber driver all you need is your car; to start your own regional airline you have to lease aircraft and premises, purchase office equipment, employ staff, painful licenses and approvals, etc.
  • Time to market—how much time is required for you to create the product or service ready for purchase? For example, you can become a cleaning contractor today; to become a physiotherapist can take years.
  • Leverage potential—is there any opportunity to leverage other products or services at the time of sale to purchasers? For example, a customer who purchases a mobile phone might also purchase a protective case, earphones, a secondary charger; a customer who purchases a coffee table most likely doesn’t need anything else to go with that coffee table.
  • Ongoing investment—after the product or service has been created, what type of additional investment will you be required to make in order to continue selling? For example, an accountant requires ongoing work to be paid; a DVD can be produced, then sold multiple times without any refinement or development.

Scoring:
5-25 : Forget about this idea and find a new one.
26-39 : The idea may provide some returns but it won’t produce significant returns on investment.
40-50 : This could be a winner. Give it your best shot.

______________________

For more useful tools and diagnostics become a Premium Member and you’ll have unlimited access to many more resources such as this one.