The Importance of Market Sizing In the Age of Start-ups

A large number of startups approach us to help them create their brands and develop their value propositions. Typically many of the startups are founded by professionals from the technology side, others are 2nd generation business people who want to strike it on their own, away from the family business.

We're seeing a pattern emerging. While they're all bright and immensely talented, they're so strong with their technology or finance that they miss one critical aspect of business: A clear understanding of the size of the market potential they're aiming for. Fundamentally this is a question that should be answered right at the beginning and with clarity before even commencing the business project report.

What is the size of market? Which competitor's audience will shift to us?

It's not just startups who miss this aspect. Even large companies miss this point. Tata Nano is a case in point. They weren't clear whether it should be motorcycle buyers or car buyers. Eventually neither are buying it.

This question appears simple to answer in traditional categories FMCG, durables etc. Who loses share when we launch this new anti-germ soap? Answer Dettol, Lifebouy... But it's not so simple is it? For the next question to answer is WHY would they do so?

Now your answer needs to be more compelling than a line in a powerpoint slide. It needs to be PERSUASIVE.

Most startups today eschew the traditional categories, many are new concepts:

A website that provides you with all kinds of handymen; An app that helps you order a lunch dabba for your meal at office; an app that gives you car service centers close to you etc.

While a number of these startups have a definition of their business, they're ambiguous about the size of it. Which is where the problem starts. Without doing this critical sizing, many businesses are today finding themselves in a quagmire, months and years down the line, unclear on which way to head. The fatigue, doubt, confusion and dwindling resources which is the consequence of jumping headlong into the fray without sizing the market, is often the death knell to a promising startup.

Therefor our advice to any start up is always: BE CLEAR WHO IS THE SOURCE OF YOUR BUSINESS.

If you provide handymen, please find out: What is the size of this unorganized sector? What is the average ticket size? Why are people using it unhappy? What is the new dynamic you're getting into the system? And how will you make money from it?

Simple as these questions may sound, very few companies actually ask themselves of these.

Answering these questions may often be a bitter pill to swallow. But it's better than a depleted bank account, a loss of quality time and a debilitating loss in confidence.

Startup, valuation, scale-up all sounds great to read in the pink pages of newspapers, but eventually they're all businesses which have to make money. And this fundamental question of business needs to be answered with clarity for that to happen.