Introduction to Market Feasibility Analysis
Market feasibility is a critical component of any business plan. It involves evaluating whether there is a sufficient market demand for your product or service, understanding the competitive landscape, and ensuring compliance with relevant regulations. This analysis provides you with the insights needed to make informed decisions about entering or expanding within a market, ultimately helping to minimise risk and maximise potential for success.
Market Size: Assessing Your Business Potential
Market size refers to the total potential sales volume or revenue that your product or service could achieve within a specific market. Determining your market size is essential for setting realistic business goals and securing investment.
Steps to Determine Market Size
1. Total Addressable Market (TAM):
The Total Addressable Market (TAM) represents the overall revenue opportunity available if you were to achieve 100% market share. This figure gives you a sense of the maximum potential size of your market, providing a high-level view of the opportunity at hand. To calculate TAM, you would consider all potential customers across a broad geographic region or demographic who could benefit from your product or service.
Example: A startup developing an electric scooter might consider the TAM as all global sales of personal transportation devices, including bikes, skateboards, and scooters.
2. Serviceable Available Market (SAM):
The Serviceable Available Market (SAM) narrows down the TAM to focus on the specific segment your product or service targets. This is the portion of the TAM that aligns with your business’s offering, considering factors like geographic reach, product features, and customer needs. SAM provides a more realistic view of the market you intend to serve.
Example: The electric scooter startup might define its SAM as the market for electric scooters specifically, excluding other personal transportation devices.
3. Serviceable Obtainable Market (SOM):
The Serviceable Obtainable Market (SOM) is the portion of the SAM that your business can realistically capture within a certain timeframe, considering your marketing and sales efforts, competitive position, and operational capacity. SOM gives you the most realistic estimate of potential revenue and is critical for business planning.
Example: The startup might focus its SOM on urban areas with high demand for eco-friendly transportation, where the need for electric scooters is highest, and where they have a strong presence.
Competitive Landscape: Understanding Your Market Position
A thorough competitive landscape analysis helps you identify and evaluate the strengths and weaknesses of your competitors. This information is vital for differentiating your product or service and carving out a competitive edge in the market.
Components of Competitive Landscape Analysis
1. Direct Competitors:
These are companies that offer products or services that are very similar to yours. Understanding their offerings, pricing, market positioning, and customer satisfaction levels will help you identify where your product stands and what improvements might be necessary to outcompete them.
Example: A new meal kit delivery service would consider companies like Blue Apron and HelloFresh as direct competitors. Evaluating their service variety, customer reviews, pricing strategies, and market reach will provide insights into how to position your service.
2. Indirect Competitors:
Indirect competitors offer alternative solutions that satisfy the same customer needs. These companies may not compete with you directly, but they still pose a threat by offering different products or services that could divert potential customers away from your offering.
Example: For the meal kit service, grocery delivery services or restaurants with takeaway options could be seen as indirect competitors. Understanding their appeal helps refine your unique value proposition.
3. Competitive Advantage:
Your competitive advantage is what sets your product or service apart from the competition. This could be unique features, superior quality, better customer service, or a more attractive price point. Identifying and enhancing your competitive advantage is key to attracting and retaining customers.
Example: The meal kit delivery service could differentiate itself by offering exclusively organic ingredients, more customisation options, or a faster delivery time compared to competitors.
Regulatory Environment: Ensuring Compliance and Minimising Risks
Understanding and navigating the regulatory environment is essential for any business, particularly those in highly regulated industries like healthcare, finance, or food and beverage. Non-compliance can lead to legal issues, fines, and damage to your brand’s reputation.
Steps to Navigate the Regulatory Environment
1. Identify Relevant Regulations:
Research and identify all industry-specific regulations that apply to your product or service. This includes safety standards, environmental regulations, data protection laws, and more. Being aware of these regulations from the start helps you avoid costly mistakes and ensures a smoother path to market.
Example: A company developing a health supplement needs to comply with FDA regulations, including strict guidelines on product labelling, safety standards, and clinical trials.
2. Consult with Experts:
Regulatory requirements can be complex and are often subject to change. Consulting with legal or industry experts who specialise in regulatory compliance ensures that your business adheres to all necessary standards. This can involve working with regulatory consultants, legal advisors, or industry associations.
Example: The health supplement company might consult with a regulatory consultant to ensure their product meets all necessary FDA requirements before going to market.
3. Prepare Documentation:
Ensure that all necessary permits, licences, and certifications are in place before launching your product. Proper documentation not only helps in compliance but also builds trust with customers and investors, showing that your business is operating legally and ethically.
Example: The health supplement company would need to have all their clinical trial data, safety certifications, and marketing authorisations ready for inspection by regulatory bodies.
Conclusion: Building a Solid Foundation with Market Feasibility
Conducting a thorough market feasibility analysis, including understanding your market size, competitive landscape, and regulatory environment, is critical for the success of your business. This foundational work not only helps in securing funding and investment but also positions your business for sustainable growth. By following these steps and continuously refining your understanding of the market, you can better navigate the challenges of launching and growing your product or service.
