The market for X is a billion dollars! The demand for Z is going to grow at 18% annually over the next five years! Being quantitative about a potential business opportunity is essential. It’s a powerful way to justify your belief in a product or a technology or a commercial strategy. But we’ve encountered too many entrepreneurs who clearly don’t believe their own numbers, or who seem to believe that the markets they are attempting to serve are so new and esoteric that their magnitudes are unknowable. And these are the entrepreneurs who suffer the most, because they are forced to make critical decisions, relying exclusively on their “gut,” or on the sentiments of people they trust, or on the sentiments of people recommended by people they trust. This is no way to run a business!
So when investing time and resources into building a market model, how do you make sure you end up with a useful decision making tool, one that you believe in, one that you can use to advocate to others? In our experience, walking through the following six considerations is critical in making sure you get what you need out of your modeling efforts.