Market potential is a crucial element in the business planning process. It will help you estimate the amount of money you can expect to make from the products or services you plan to market. It is the total demand for a product in a given business environment. Keep in mind the estimate is only as good as the information being used.
Five steps to identify your market potential:
- 1. Verify Market Size
- Volume – total number of potential customers
- Value – total financial value consumers are able to pay for market products
- Market Growth: Short term and long-term forecasts
- Track financial trends in similar businesses a few years back
- Look at growth dynamics that will stimulate the market currently and in the future
- Competition
- Determine the number of competing companies in your market area
- Identify their strengths and weaknesses
- Does your product or service offer a competitive advantage?
- What barriers need to be overcome for your company to break into the market?
- Determine the number of competing companies in your market area
- Analyzing Potential Customer Base
- Create a potential client profile
- Primary client base
- Secondary client base
- How will you reach your client base?
- Create a potential client profile
- Profitability
- Profit potential from initial investment
- Balance between the size of the financial outlay and potential profit
- Use any of the tree elements below to determine profitability
- ROI – Return on Investment
- ROS – Return on Sales
- RONA – Return on net assets
- ROCE – Return on capital employed
The University of Mary Washington Small Business Development Center (UMW SBDC) helps local businesses evaluate their business to determine effective strategies for growing and scaling their business. If you are a client, please contact your consultant to schedule an appointment. If you are not already a client, you may register for free, confidential business assistance by completing a Request for Consulting form on our website, www.umw.edu/sbdc.