Step-by-step mar­ket analy­sis

A strong mar­ket analy­sis helps you under­stand your product’s poten­tial and how to posi­tion it effec­tive­ly. It pro­vides essen­tial insights to shape your prod­uct and busi­ness mod­el – includ­ing mar­ket size and growth, your com­pe­ti­tion, alter­na­tive solu­tions, and your cus­tomer seg­ments and their needs.

1. Iden­ti­fy the prob­lem you want to solve

Before div­ing into mar­ket num­bers, make sure you can clear­ly define the prob­lem you’re address­ing. Ask your­self:

• Prob­lem and your USP: What prob­lem are you solv­ing? What makes your approach stand out? Clar­i­ty here will guide the rest of your analy­sis.
• Impact angle: How does your solu­tion dif­fer from tra­di­tion­al ones in terms of social or envi­ron­men­tal ben­e­fit? Be spe­cif­ic and keep it short – what’s the pos­i­tive change you’re dri­ving?
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Ide­al­ly, you have already tack­led this in the chap­ter “Prob­lem and tar­get group analy­sis: How to val­i­date for impact star­tups” and have clear­ly defined your solu­tion under “Solu­tion design for impact star­tups: How to real­i­ty-check your idea.” If not, con­sid­er the fol­low­ing steps:

2. Deter­mine your total address­able mar­ket (TAM)

Your total address­able mar­ket (TAM) is the full mar­ket your solu­tion could reach in the­o­ry. The basic for­mu­la:

Total num­ber of poten­tial cus­tomers x aver­age annu­al rev­enue per cus­tomer

To size your TAM, look for up-to-date indus­try reports, mar­ket data, and open sources – think gov­ern­ment pub­li­ca­tions or trade asso­ci­a­tion data. Also ask your­self the fol­low­ing ques­tions:

• How big is the mar­ket real­ly?
• Which prod­ucts or ser­vices are tru­ly part of the same mar­ket as yours?
• Who could ben­e­fit from your solu­tion, even if you’re not reach­ing them yet?

3. Define your ser­vice­able avail­able mar­ket (SAM)

Your ser­vice­able avail­able mar­ket (SAM) is the por­tion of the TAM you could real­is­ti­cal­ly serve. It’s the audi­ence you could reach if resources weren’t a lim­it­ing fac­tor. The for­mu­la is as fol­lows:

Num­ber of reach­able cus­tomers x aver­age annu­al rev­enue per cus­tomer

To cal­cu­late the SAM, nar­row down your tar­get group by geog­ra­phy, demo­graph­ics, indus­try, or oth­er fil­ters. Con­sid­er your prod­uct spec­i­fi­ca­tions and sales capac­i­ty and ask your­self the fol­low­ing ques­tions:

• Which cus­tomer seg­ments are most like­ly to ben­e­fit from your solu­tion?
• Are there geo­graph­ic, demo­graph­ic, or behav­ioral fac­tors that shape your mar­ket?
• Are there tech­ni­cal, legal, or logis­ti­cal bar­ri­ers that could lim­it your reach?

4. Esti­mate your ser­vice­able obtain­able mar­ket (SOM)

Your ser­vice­able obtain­able mar­ket (SOM) is the slice of the mar­ket you can real­is­ti­cal­ly cap­ture with the resources and capac­i­ty you have right now.

Real­is­ti­cal­ly achiev­able mar­ket share x SAM

To cal­cu­late it, assess where you stand in the mar­ket and how com­pet­i­tive your space is. If you’ve already explored exist­ing alter­na­tives in Solu­tion design: Cre­at­ing a solu­tion that dri­ves real impact, you’re off to a good start. Next, look at the resources you can actu­al­ly use to win mar­ket share – like your sales capac­i­ty, mar­ket­ing bud­get, and part­ner­ships. And ask your­self the fol­low­ing ques­tions:

• With the team and tools you have today, how much of your SAM can you actu­al­ly reach?
• What com­pet­i­tive dynam­ics could lim­it or boost your abil­i­ty to grow?
• How long will it take to get there?

5. Draw clear lines between TAM, SAM, and SOM

To make your mar­ket analy­sis sol­id and cred­i­ble, define each seg­ment – TAM, SAM, and SOM – clear­ly and sep­a­rate­ly. Avoid over­laps, use dis­tinct cri­te­ria, and doc­u­ment your assump­tions and sources so oth­ers can fol­low your log­ic. And ask your­self the fol­low­ing ques­tions:

• Have you clear­ly defined non-over­lap­ping cri­te­ria for TAM, SAM, and SOM?
• Can you clear­ly delin­eate each area?
• Are you sure you’re not count­ing part of your SAM again in your TAM?

6. Exam­ine trends and exter­nal forces

Now it’s time to zoom out and con­sid­er the big­ger pic­ture. What indus­try trends, pol­i­cy shifts, or social trends could accel­er­ate – or block – your impact? Look at things like emerg­ing tech­nolo­gies, reg­u­la­to­ry devel­op­ments, or grow­ing inter­est in sus­tain­able finance. Then think through what exter­nal risks – such as legal changes or eco­nom­ic volatil­i­ty – might affect your path. Also ask your­self the fol­low­ing ques­tions:

• What trends could shape the suc­cess of your start­up?
• What exter­nal shifts should you keep an eye on so you can adapt quick­ly?
• Are there any polit­i­cal or legal changes that could affect your users or your solu­tion?

Next up: Val­i­date your assump­tions

You’ve just wrapped up a key mile­stone – map­ping out your mar­ket and iden­ti­fy­ing the trends that could influ­ence your startup’s future.

‚Now it’s time to stress-test your assump­tions. In the next chap­ter, we’ll walk you through how to con­nect with your tar­get audi­ence and get real feed­back on your idea.