Launching a business can be a challenging endeavor, especially as entrepreneurs typically start from scratch, from coming up with a viable idea to developing a plan to bring it into reality. This is why this venture requires lots of research, almost every step of the way.
Feasibility studies and projections are just some of the most important parts of a business plan. However, many people tend to overlook another essential aspect of this document: the market opportunity assessment.
Those who are interested in launching a business should familiarize themselves with this. This article will talk about what a market opportunity assessment is, what it can offer, and how to conduct it effectively.
Market Opportunity and Market Research
Before getting into the definition of this assessment, It is important to understand what exactly market opportunity is. The truth about the market opportunity is it is an essential part of market research. According to Investopedia (2021), “market research is the process of determining the viability of a new service or product through research conducted directly with potential customers.”
This definition shows that having a business idea is not a strong enough jump-off point to launch a business. Instead, entrepreneurs need to conduct a study to determine how their prospective customers will receive the product or service they are planning to offer.
This is an essential detail because it demonstrates the need for assessing the market before pushing through with any plan to launch a business. In connection with this, entrepreneurs can look for market opportunities to cater to the needs of their target market.
Ninisha Pradhan (2021) from business software and services reviewing company G2 defined market opportunities as “the future size of your business and revenue.” An essential part of this is the process of looking for gaps in the market, which the entrepreneur seeks to fill by offering products or services.
To demonstrate, say a market lacks a milk supplier, which potential customers clamor for. This lack of suppliers presents a market opportunity for an entrepreneur, which they can fill by bringing in supplies of milk to satisfy the demand or interest. Another way to look at it is if a market already has a supplier, but customers are looking for other options.
What is a Market Opportunity Assessment?
Given the definition and example above, it is easy to understand that market opportunity assessment or analysis is “a method that determines the desirability of a business opportunity” (Pradhan, 2021). This is important to any business plan as it takes a closer look at a potential market to find opportunities.
This ensures due diligence on the part of the entrepreneur as it gives them a clearer picture of what kind of products or services they can offer, instead of coming up with an idea and doing market research to see its viability.
There is no right time to do a market opportunity assessment, as opportunities can appear anytime. This is why entrepreneurs cannot schedule market opportunity assessments. Instead, it is better to do such analysis as opportunities come along. The better approach is to work out objectives and use this list as a guide to identifying the right opportunities.
Once entrepreneurs find an opening in the market that they can fill, a market opportunity assessment offers a lot of advantages. For one, this type of analysis can help them smooth out the specifics of an opportunity to evaluate its potentials.
Generally, it can give a more workable picture of the future business. The results of this analysis can also offer insights on the strategies the business could take to further improve its performance, including potential areas of improvement and challenges.
A Guide for Assessing Market Opportunities
Startups tend to face a lot of difficulties as they start small, albeit scalable, then work their way up. They also tend to have challenges when it comes to financing. Entrepreneurs planning to launch a startup need to take their time to do market opportunity assessments. Below is a step-by-step guide on how to conduct this analysis.
1. Breaking Down the Market
Entrepreneurs who are looking to carve a market for an offering that is yet to exist will divide the market before doing the study. This is called market segmentation. Many startups tend to offer unique products or services, which means that no market for their offerings exists.
To find out the potential of the opportunity, the business should look at the prospective market in segments. It may be divided by age range, gender, income, and lifestyle. Surveys and studies can help determine their interest in and need for the future product or service.
2. Looking Into Purchasing Power
Speaking of segmentation, income and purchasing power play a huge role in determining the potency of an opportunity. This can aid in the creation of pricing models, especially as the business is looking to supply its needs.
In relation to this, it may be important to look into their consumption patterns, which can show what types of products they tend to purchase at what price points. This can give entrepreneurs an idea of how much they are willing to spend on particular types of products or services.
3. Relevant Context
When looking for opportunities and determining their potencies, it is important to analyze the current situation the market is in. Remember, the latest happenings and events can help shape the demands and needs of the market.
Take the current public health issue for example. It boosted the market’s need for contactless transactions, so digital wallets and payment apps are thriving. Taking a similar approach to market opportunity assessment is the next best step.
4. Finding Competitors
Looking for competitors enables businesses to know what they are up against. Direct and indirect competitors are bound to be doing something specific to their business. Budding entrepreneurs should know how to one-up their competitors to find their way into customers’ awareness.
Final Words
Doing a market opportunity analysis is always a good idea for entrepreneurs, especially those planning to launch a startup. This way, they can find their footing and successfully enter the market by expanding the potential of an opportunity.
References:
- Investopedia. (2021). Market research. Retrieved from https://www.investopedia.com/terms/m/market-research.asp
- Pradhan, N. (2021). How to assess market opportunities for your business. Retrieved from https://learn.g2.com/market-opportunity
