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Many entrepreneurs find it difficult to determine what exactly their market opportunity is; finding the right statistics for your industry can be challenging but once you know what to look for, finding data becomes much easier.
The following are types of statistics that should be used when determining your market opportunity.
Market Size
It is important to use relevant statistics when talking about your market size. Often times I hear entrepreneurs make the statement, “If I don’t show a huge market size investors won’t be interested.” This statement is valid, but only to a certain extent. Ideally, investors would like to see you in an industry with a lot of potential but they are also able to see right through any B.S.
Let’s take a look at an example, if you are selling wiper blades for vehicles, stating that the U.S. auto sales market was $570 billion in 2015 is a bit too broad. Instead try saying the U.S. aftermarket parts are a $62 billion industry. Finding a statistic about how much Americans spent on windshield wipers would be even better.
Finding the relevant statistics you need about your industry is going to take some time and effort, but finding the right statistics can make a world of difference to investors.
Key Metrics
A key metric can be anything related to your industry. Determine what statistic or piece of information investors would be most interested in knowing about your industry. Keep in mind that information needs to be relevant.
Industry Growth Rate
How fast is your industry growing? Try comparing it to the growth rate of a similar industry to provide prospective. For example, the market for the energy drink industry is growing at 6% a year vs. the entire carbonated soft drink category is only growing at 3% per year. On its own a 6% growth doesn’t sound too impressive, but when you can show that it’s growing twice as fast as a similar industry that growth seems more substantial.
Sources for Market Information
So where do you go to retrieve all of these statistics? You might have already tried to search for your market size on Google and found that nothing popped up. If you are in a niche industry a majority of the data might not be publically available in an obvious fashion.
There are a few key steps I like to follow when looking for the necessary statistics.
Step 1
When looking for market data, the first step I take is figuring out the NAICS industry code for the category I’m researching. NAICS stands for North American Industry Classification System, which is used by the U.S. Census to categorize your industry. You will be amazed by the amount relevant information this site has to offer; to start you search head over to Census.gov. It’s going to take some time and effort to find exactly what you are looking for and you may have to dig through some complex spread sheets, but I assure you most of the data you need is there. The U.S. Small Business Administration, SBS.gov, is another great resource to use when looking for relevant statistics.
Step 2
The second step I suggest taking when looking for market data is googling competitors in your industry. Many times companies will issue press releases that contain the market size and growth rates of their industry. This is especially easy to find if your competitors are publicly traded companies. Take a look at finance.yahoo.com if there are any public companies in your industry. All the financials of publicly traded companies are available on this site under the financial statement section.
If you are willing to pay for this information there are a few companies that offer full industry analysis reports, but they are often pretty expensive. If you decide to go this route a couple good options are Hoovers or IbisWorld.
Step 3
If you still haven’t been able to find any information that is relevant to your niche industry, try doing a web traffic analysis. By doing this you can determine how much traffic your competitors are getting on their web page each day, this can often be great information for you to know regardless.
There are hundreds of SEO tools available for tracking web traffic but a good starting point is Alexa. Another component to look at is the key words people are typing in to find your competitors, this will give insights on potential customers. Lastly, viewing the social media pages of your competitors is a great way to see just how lively the industry is.
Taking these steps into consideration when determining your market opportunity can make the process easier and provide you with some great information. Having relevant data to back up your market opportunity claims will leave you looking much more credible in the eyes of potential investors.
Other advice for startups seeking funding:
Jake Fisher
Jake Fisher is the founding partner at Venture Formations. Jake serves as a startup advisor helping entrepreneurs through the funding process. On Twitter @VentureJakeF
