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Business Planning Basics:  Don't Forget Your Market! 

Recently I was coaching a group of entrepreneurs and came up against a much too common scenario:

The founding member of the group was convinced his technology/product was ready for market launch.

Problem was, the group hadn't yet discussed what and who the market was and whether it was worth going after. 

Don't fall into the trap of being so enamored with your idea, venture or invention, that you forget to perform a thorough market analysis.  You don't have to spend a lot of money on fancy research (although at some point you'll be wise to invest in some hard data).  Start by answering the FIVE basic questions of a good Market Opportunity Analysis. 

Question 1 (Customer Value):  Why is someone going to buy your product? 

What problem will your product solve and why would someone start using your method/product/service versus what they are doing right now?  What pain will you relieve? "Benefits" are not enough!  You must relieve pain or solve a real problem!  Customer value is the key question to answer first---AND be honest.  Don't bother with the rest of the questions if you can't answer this one. 

Question 2 (Market Profile):  What type of organizations/persons/users will buy your product? 

Notice I didn't say "use".  Is the user the same as the buyer?  Where is the buyer?  How many buyers are there?   Where are they located?  What is their current state? How will we get to them?

From this exercise you will arrive at a number that represents the "available buyers." 

Question 3 (Market Size): How big is the market for this product?

Multiply your estimated size of the market (number of available buyers) times your best estimate of a price for your product. 

The price must be based on reason:  how are comparable products priced?  What is the ROI of the product?

Calculate a figure for market size that represents market size right now, and also a future projection based on trends that will impact market characteristics and "buyer pain."

From this exercise you will calcuate your market size and growth in terms of dollars. 

Note: This is NOT your projected revenues or profits! 

Question 4 (Market Share): What percentage of the market will we have?

This is the other question (besides customer value) where entrepreneurs lose their sense of reason.

Approach this exercise by asking yourself these key questions about "ramp up":

How many of my products can I sell in year 1, year 2, year 3, year 4,  and year 5, based on my ability to: a) build the product, b)educate the user/buyer, c)approach the buyer, d)close the sale, e)deliver the product,  and f)handle the competitors also entering the market.

Resist the temptation to take the short-cut of: "if we only capture 1% of the market, we'll be millionaires."  If it's that's easy to capture 1% of the market you will have a million competitors.

Do your homework and work out a pro forma sales projection for the first 5 years to figure market share and growth---and be sure to factor in the "ramp up."

Question 5 (Competitive landscape):  Why will someone buy from us and not the competition?

What will you do that is different?  Will you compete on the basis of: a) price, b) special features, or c) overall value?

What will the competition say about your product?  What you will say to a potential buyer about the competition?

And puhhleease don't say you have no competitors! 

If you can walk through these five basic questions about your market and create a defensible market plan, you are well on your way to a successful business plan. 

Francine R. Gaillour, MD, Business Consultant and Executive Coach for Healthcare Leaders francine@physicianleadership.com, (206) 686-4205

 

Francine R. Gaillour, MD, MBA, FACPE
15600 NE 8th Street, Suite B1-173
Bellevue, WA  98008
(206) 686-4205
www.PhysicianLeadership.com 

Francine R. Gaillour, MD   2006 Ki Health, Inc.