The product, service or technology that serves as the foundation of your new business enterprise must be more than a good idea or cool science project. It must solve a critical problem or respond to a compelling market opportunity. Indeed, lenders, investors and potential employees will want to understand the size and scope of this opportunity. And, so must you.

When it comes to assessing your market opportunity, your opinion might be interesting but it is no substitute for documenting in a serious and professional manner the market landscape in your space. In fact, many experienced entrepreneurs will tell you that during their initial assessment of the market opportunity, they determined that they were focusing on the wrong market.

So, what is the best course of action that will enable you to document your market opportunity?

Step one is to simply list the questions that must be answered as you validate the opportunity. For example, questions that you might want answers to include:

  • What customer needs will your product, service or technology address?
  • Who is the customer (profile) that will benefit?
  • What is the size of the customer base?
  • Who are some potential customers by name?
  • How does the customer currently meet the needs to be addressed?
  • Have customers said that they will purchase your product, service or innovation?
  • How much can you sell annually?
  • How much will customers pay for it?

So, now that you know the questions, it is time to get the answers. This is the tough part of the job. The answers should be quantitative and verifiable whenever possible. Keep track of your sources. Here are some useful ways of researching your market opportunity.

Web Search – Using your favorite search engine and appropriate search words or phrases, begin a careful search of everything you can find on the internet that pertains to your product, service or technology; your intended target market; your presumed competition and your prospective customers. Sophisticated research reports, studies and analysis may be purchased online from firms such as Frost & Sullivan and Forrester Research.

Public Company Documents – If you haven’t done this already, you want to review websites and public financial information of possible competitors and customers. In one place you might find that a competitor brags that it has captured 17% of the market and in another place you might find that it will book revenue of $15 million in the current year. Some simple arithmetic will tell you one competitor’s assessment of the total size of the market.

Industry Meetings & Trade Shows – People love to talk about themselves and their companies. By attending targeted industry gatherings, you will be amazed at how much you can learn. Remember to document who you speak with and what they say.

Interview Potential Customers and Partners – This is often the most time consuming and most difficult to accomplish but it is always going to be your most effective form of market research. Talk to customers and find out if they will buy what you hope to sell. If so, how much will they buy and what are they willing to pay? We know how hard this is but we also know how important this information is to your success.

Successful entrepreneurs really understand their markets. This knowledge will allow you to execute with focus and precision. But don’t worry. If you don’t want to make the market research investment upfront, the market will teach you everything you need to know. The only problem is that by then, it will be too late.

To learn more about what investors require in a clear, concise and compelling business plan browse BizPlanIt’s Virtual Business Plan.