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How To Conduct a Market Analysis - SD Forum's Crafting A Fundable Roadmap For Your Startup

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How To Conduct a Market Analysis - SD Forum's Crafting A Fundable Roadmap For Your Startup

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How to conduct market analysis - a roadmap for startups. Presented at Software Development Forum March 31, 2009. Steve Tennant, Tennant Consulting, www.tennantconsulting.com. Tip of the hat to Scott Schwertly from Ethos3 Communications for "Meet ____" presentation format.

How to conduct market analysis - a roadmap for startups. Presented at Software Development Forum March 31, 2009. Steve Tennant, Tennant Consulting, www.tennantconsulting.com. Tip of the hat to Scott Schwertly from Ethos3 Communications for "Meet ____" presentation format.

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How To Conduct a Market Analysis - SD Forum's Crafting A Fundable Roadmap For Your Startup

  1. Meet Susan
  2. Also known as…
  3. Ms. Entrepreneur
  4. Susan lives in…
  5. Flickr: http2007
  6. and went to school at…
  7. Flickr: matsuda.yukihiro
  8. and has an idea for a startup…
  9. EasyERP The Best Run Businesses Are Easy
  10. She got a little seed funding from…
  11. But will her idea…
  12. How would you help Susan answer that question?
  13. Assessing Susan’s Market Opportunity • Will customers leap at the Compelling Unmet chance to own Need your solution? • Can you easily explain how Explainable Uniqueness you’re different? Revenue Potential • How large is “the pie”, and Market Size and Growth how fast is it growing? • With how many others Competition must you share the pie?
  14. Why do new products fail? Primary Causes of Product Failure Inadequate Market Analysis Product Problems or Defects Lack of Effective Marketing Effort Higher Costs Than Anticipated Competitive Strength or Reaction Poor Timing of Introduction Technical or Production Problems All Other Causes 0% 10% 20% 50% 30% 40% Percentage of Companies Citing (n=233) Source: Conference Board as cited by R.G. Cooper, Winning at New Products
  15. How Susan Can Save Time and Money Without With Market Analysis Market Analysis (Best case) Money Saved Difference in % of Payback cash Breakeven flow 3 1 2 First Customer First Customer Failed Project (50-80% probability) Time (Years) 17
  16. What should Susan do?
  17. Stuff Susan Might Do Market Analysis Market Research Market Sizing Focus Groups Opportunity Interviews Assessment Competitive Surveys Analysis
  18. Best Practice When Should Susan Do It? Today Idea Screening Product “Quick & Dirty” Market Analysis Concept Review Development Preliminary Technical Assessment Process Detailed Market Validation Business Case Review Business & Financial Plan Post Product/Service Development Development Review In-House Tests Customer Tests Trial Sell Trial/Pilot Production Launch Pre-Launch Business Analysis Decision Production Startup Launch Source: Robert Cooper, Winning at New Products
  19. Do It Multiple Times Friends & Family First product Version – 3 customers Angel Round Second product Version – 10 customers Third product Series A Version – 50 customers
  20. The roadmap: A three stage, iterative process Two days 1 Two weeks 2 Two months 3
  21. 1 Idea Screening
  22. Idea Screening: 1 1.1 Define Your Business Concept - Who are your customers - What are their important problems? - How do you solve their problem better than anyone else?
  23. 1 Idea Screening: 1.2 Estimate the market size
  24. Why is market size important to investors?
  25. For less mature markets try “<industry> market billions”
  26. “EasyERP will make its projected revenues with just 1% of the $48B ERP Software Market”…
  27. Does this answer the “will it fly” question?
  28. Idea Screening: 1 1.3 - Identify the key risks
  29. What are the greatest risks for Susan? • Market Risk • Competitive Risk • Product Risk • Financial Risk • Technology Risk • Team Risk • Other?
  30. Susan believes her greatest risk is competition. She decides to emphasize competitive analysis.
  31. “Quick & Dirty” 2 Market Analysis
  32. “Quick and Dirty” Market Analysis 2 What you can do from your desk, a trip to the library, and the coffee shop
  33. “Quick and Dirty” Market Analysis 2 Free article: Ten steps to increase your market success. - Clarify your research objectives - Define your ideal customer and possible market segments. - Identify how customers solve the problem today. - Size the market – demand and supply. - Identify market, technical, industry, societal and regulatory trends that affect spending on your category of solution. - Identify what you imagine to be your customer’s selection criteria and buying process. - Talk to 3-5 “friendlies” to validate your customer’s goals, problems and evaluation criteria, how they would buy, and alternative solutions. - Identify your customers top three goals, challenges, and pain points and their relationship to your solution. - Write down the top three reasons you believe customers should buy your solution instead of how they do it today or competing solutions. - Define your sales model.
  34. 2 Bottoms Up A * B * C = Market Size Where A = # of customers B = average transaction size C = # of transactions/customer/year
  35. How big does the market size need to be?
  36. 2 Terminology • Total Available Market (TAM) = entire universe that could ever buy your product – for your niche, anywhere • Addressable Market = revenue represented by the market segments that you intend to sell and service in the time covered by your business plan, or initial investment
  37. Estimate EasyERP TAM – Bottoms Up Segment 1 – Enterprise Segment 2 – Medium Business CAGR = Compound Annual Growth Rate
  38. Is that big enough?
  39. “Our competitors include”…
  40. Competitive Matrix SAP Oracle NetSuite EasyERP Market share rank 1 2 ? N/A Easy of Use 3 3 4 5 On-Demand 1 1 5 5 Multi-currency 5 4 4 5 Easy Install 2 2 4 5 Easy Changes 2 2 3 5 Customer Base 5 5 3 1
  41. “EasyERP is the first system specifically designed to be easy to install, easy to change and easy to use…”
  42. Find a Proven Sales Model Unprofitable: Enterprise You lose Selling Investment in each transaction by Your Company Consultative Selling Poor service: Transactional You lose Selling Investment in each transaction by Customer Recommended reading: Neil Rackham, Rethinking the Sales Force
  43. “With an average transaction size of $80,000, EasyERP will use an inside telesales and online sales model…”
  44. Before we build a better mousetrap, we need to find out if there are any mice out there.” - Yogi Berra
  45. Detailed Market Analysis 3
  46. Detailed Market Validation 3 Conduct 20-30 interviews with representative customers. What are their needs? Will they buy? Our new What’s frustrating employees run about your ERP screaming they system? hate it so much.
  47. Sample Interview Questions • What are your top 3 goals? Challenges? • Typical day in your life? • How do you solve this problem today? • Who would you trust for advice? • How would you want to buy it? • What would you expect to pay? • What services would come with it? • If you had three choices in front of you, what criteria would you use to evaluate them? • What did you expect to talk about that we haven’t?
  48. Case Study – SaaS B2B Software Target Account List Contacted Interviewed Results 500 75 26 • Prioritized features • Feedback on prototypes of next five products • Development partners & contacts • Company exposure/visibility • Management team alignment • Customer-centric, problem-driven messaging • White papers summarizing key business issues & how to address • & more
  49. Can Susan Generate Traffic Online?
  50. Now Susan knows…
  51. …what her customers need
  52. …how is different
  53. …and how to make her idea fly
  54. Thanks to…
  55. Grow your software company. Faster.
  56. Tennant Consulting Services Strategy Capital Products Marketing Alliances Executive Team Financing Product Mgmt Marketing Alliance Facilitation Assessment Assessment Assessment Assessment Market Needs Positioning & Vision & Mission Business Plan Alliance Strategy Interviews Messaging Market Trends & Investor Win/Loss Website Strategy Alliance Programs Analysis Presentation Analysis & Content Competitive Product Business Marketing Plan & Investor Meetings Alliance Marketing Analysis Plan Budget Opportunity Due Diligence Product PR & Thought Alliance Partner Assessment Support Messaging Leadership Recruiting Strategy Term Sheet Trade Shows & Relationship Beta Customers Development Support Events Rescue/Facilitation Strategy Execution Board Sales & Customer Alliance Scorecard Launch & Metrics Communications Conferences & Metrics Project Management Leadership Feedback & Coaching Organization Design, Staff Recruiting & Development Collaborative Operating System
  57. Tennant Consulting Services Strategy Capital Products Marketing Alliances Executive Team Financing Product Mgmt Marketing Alliance Facilitation Assessment Assessment Assessment Assessment Market Needs Positioning & Vision & Mission Business Plan Alliance Strategy Interviews Messaging Market Trends & Investor Win/Loss Website Strategy Alliance Programs Analysis Presentation Analysis & Content Competitive Product Business Marketing Plan & Investor Meetings Alliance Marketing Analysis Plan Budget Opportunity Due Diligence Product PR & Thought Alliance Partner Assessment Support Messaging Leadership Recruiting Strategy Term Sheet Trade Shows & Relationship Beta Customers Development Support Events Rescue/Facilitation Strategy Execution Board Sales & Customer Alliance Scorecard Launch & Metrics Communications Conferences & Metrics Project Management Leadership Feedback & Coaching Organization Design, Staff Recruiting & Development Collaborative Operating System
  58. Drop me a business card for freebies and to learn more  Copy of slides  Business Concept Questionnaire  22-Page Article – How to Conduct “Quick & Dirty” Market Analysis  Email newsletter Follow me on Twitter: steve811 Email me at steve@tennantconsulting.com Call me at (925) 258-9100

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