how to conduct a market analysis - sd forum's crafting a fundable roadmap for your startup

Meet Susan

Also known as…

Ms. Entrepreneur

Susan lives in…

Flickr: http2007

and went to school at…

Flickr: matsuda.yukihiro

and has an idea for a startup…

EasyERPThe Best Run Businesses Are Easy

She got a little seed funding from…

But will her idea…

that question?

How would youhelp Susan answer

Assessing Susan’s Market Opportunity

Compelling Unmet Need

• Will customers leap at the chance to own your solution?

Explainable Uniqueness

• Can you easily explain how you’re different?

Market Size and Growth

• How large is “the pie”, and how fast is it growing?

Competition

• With how many others must you share the pie?

Revenue Potential

Why do new products fail?

Inadequate Market Analysis

Product Problems or Defects

Lack of Effective Marketing Effort

Higher Costs Than Anticipated

Competitive Strength or Reaction

Poor Timing of Introduction

Technical or Production Problems

All Other Causes

10% 20% 30% 50%40%0%

Percentage of Companies Citing (n=233)

Source: Conference Board as cited by R.G. Cooper, Winning at New Products

Primary Causes of Product Failure

% of cash flow

17

Failed Project(50-80% probability)

WithoutMarket Analysis(Best case)

With Market Analysis

Time (Years)

1 2 3

First Customer

First Customer

Difference in Payback

Breakeven

Money Saved

How Susan Can Save Time and Money

Whatshould Susan do?

Stuff Susan Might Do

Market AnalysisMarket Research

Market Sizing

Competitive Analysis

Focus Groups

Surveys

InterviewsOpportunityAssessment

Best Practice

When Should Susan Do It?Idea Screening

“Quick & Dirty” Market Analysis

Preliminary Technical Assessment

Detailed Market Validation

Business & Financial Plan

Product/Service Development

In-House Tests

Customer Tests

Trial Sell

Trial/Pilot Production

Pre-Launch Business Analysis

Production Startup

Launch

Concept Review

Business Case Review

Post

Development

Review

Launch

Decision

Today

Source: Robert Cooper, Winning at New Products

Product

Development

Process

Do It Multiple Times

Friends & Family

Angel Round

Series A

First product

Version –

3 customers

Second product

Version –

10 customers

Third product

Version –

50 customers

The roadmap:A three stage, iterative process

1

2

3

Two days

Two weeks

Two months

Idea Screening1

- Who are your customers- What are their important problems?- How do you solve their problem

better than anyone else?

1 Idea Screening: 1.1 Define Your Business Concept

1

Idea Screening: 1.2 Estimate the market size

Why is market sizeimportant to

investors?

For less mature markets try “<industry> market billions”

“EasyERP will make its projected

revenues with just 1% of the

$48B ERP Software Market”…

Does this answer the

“will it fly” question?

1 Idea Screening: 1.3 - Identify the key risks

What are the greatest

risks for Susan?

• Market Risk

• Competitive Risk

• Product Risk

• Financial Risk

• Technology Risk

• Team Risk

• Other?

Susan believes her greatest risk is

competition. She decides to emphasize competitive analysis.

“Quick & Dirty” Market Analysis

2

2 “Quick and Dirty” Market Analysis

What you can do from your desk, a trip to the library, and the coffee shop

Free article: Ten steps to increase your market success.- Clarify your research objectives- Define your ideal customer and possible market segments.- Identify how customers solve the problem today.- Size the market – demand and supply.- Identify market, technical, industry, societal and regulatory trends that

affect spending on your category of solution.- Identify what you imagine to be your customer’s selection criteria and

buying process.- Talk to 3-5 “friendlies” to validate your customer’s goals, problems and

evaluation criteria, how they would buy, and alternative solutions.- Identify your customers top three goals, challenges, and pain points and

their relationship to your solution.- Write down the top three reasons you believe customers should buy your

solution instead of how they do it today or competing solutions.- Define your sales model.

2 “Quick and Dirty” Market Analysis

Bottoms Up

A * B * C = Market SizeWhere

A = # of customers

B = average transaction size

C = # of transactions/customer/year

2

How big does the

market size need to be?

Terminology

• Total Available Market (TAM) = entire universe that could ever buy your product – for your niche, anywhere

• Addressable Market = revenue represented by the market segments that you intend to sell and service in the time covered by your business plan, or initial investment

2

Estimate EasyERP TAM – Bottoms Up

Segment 1 – EnterpriseSegment 2 – Medium Business

CAGR = Compound Annual Growth Rate

Is that big enough?

“Our competitors include”…

Competitive Matrix

SAP Oracle NetSuite EasyERP

Market share rank 1 2 ? N/A

Easy of Use 3 3 4 5

On-Demand 1 1 5 5

Multi-currency 5 4 4 5

Easy Install 2 2 4 5

Easy Changes 2 2 3 5

Customer Base 5 5 3 1

“EasyERP is the first system specifically

designed to be easy to install, easy to change

and easy to use…”

Find a Proven Sales Model

Transactional

Selling

Consultative

Selling

Enterprise

Selling

Unprofitable:You lose

Poor service:You lose

Investment in each transaction by Your Company

Investment in each transactionby Customer

Recommended reading: Neil Rackham, Rethinking the Sales Force

“With an average transaction size of

$80,000, EasyERP will use an inside telesales

and online sales model…”

Before we build a better mousetrap, we need to find out if there are any

mice out there.”

- Yogi Berra

3 Detailed Market Analysis

Conduct 20-30 interviews with representative customers.What are their needs? Will they buy?

3 Detailed Market Validation

What’s frustrating about your ERP

system?

Our new employees run screaming they hate it so much.

Sample Interview Questions

• What are your top 3 goals? Challenges?

• Typical day in your life?

• How do you solve this problem today?

• Who would you trust for advice?

• How would you want to buy it?

• What would you expect to pay?

• What services would come with it?

• If you had three choices in front of you, what criteria would you use to evaluate them?

• What did you expect to talk about that we haven’t?

Case Study – SaaS B2B SoftwareTarget Account List

500Contacted

75Interviewed

26Results

• Prioritized features• Feedback on

prototypes of next five products

• Development partners & contacts

• Company exposure/visibility

• Management team alignment

• Customer-centric, problem-driven messaging

• White papers summarizing key business issues & how to address

• & more

Can Susan Generate Traffic Online?

Now Susan knows…

…what her customers need

…how

is different

…and how to make her idea

fly

Thanks to…

Grow your software company. Faster.

Tennant Consulting Services

Organization Design, Staff Recruiting & Development

Collaborative Operating System

Alliance Assessment

Alliances

Alliance Strategy

Alliance Programs

Alliance Marketing

Alliance Partner Recruiting

Relationship Rescue/Facilitation

Alliance Scorecard & Metrics

Marketing Assessment

Marketing

Positioning & Messaging

Website Strategy & Content

Marketing Plan & Budget

PR & Thought Leadership

Trade Shows & Events

Sales & Customer Conferences

Product Mgmt Assessment

Products

Market Needs Interviews

Win/Loss Analysis

Product Business Plan

Product Messaging

Beta Customers

Launch

Financing Assessment

Business Plan

Investor Presentation

Investor Meetings

Due Diligence Support

Term Sheet Support

Board Communications

Capital

Project Management

Leadership Feedback & Coaching

Executive Team Facilitation

Vision & Mission

Market Trends & Analysis

Competitive Analysis

OpportunityAssessment

Strategy Development

Strategy Execution & Metrics

Strategy

Drop me a business card for

freebies and to

Copy of slides

Business Concept Questionnaire

22-Page Article – How to Conduct “Quick & Dirty” Market Analysis

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how to conduct a market analysis - sd forum's crafting a fundable roadmap for your startup

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