MarketSizeFinal101102

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How to Size Your Market and Evaluate an Opportunity:

SKMurphy, Inc. (www.skmurphy.com) 2010 How to Size Your Market and Evaluate an Opportunity Sean Murphy, SKMurphy Inc. SDForum KickStart Your Startup Nov-2-2010 1

Who’s In The Audience?:

Who’s In The Audience? Role Engineering / Development Marketing & Business Development Sales Company Size Large Company – Many Product Lines Smaller Company – One Main Product / Line Startup – First Product SKMurphy, Inc. (www.skmurphy.com) 2010 2

Market Sizing What Are You Trying To Determine? :

Market Sizing What Are You Trying To Determine? Does A Market Exist? Will Customers Want & Pay For Your Solution? How Can You Differentiate Yourself? How Large Is The Pie? How Many Others Will Share The Pie? Seeking Investment Risk Reducing Milestone SKMurphy, Inc. (www.skmurphy.com) 2010 3

What Brings You Here Today:

What Brings You Here Today Developing a Funding Presentation Need a Market Size for Potential Investors Considering Developing a Product Want to Determine If a Market Exists Developing A Product What Features Drive Potential Market Share Other ? SKMurphy, Inc. (www.skmurphy.com) 2010 4

Let’s Compare Two Pitches :

Let’s Compare Two Pitches Real Examples From About 2006 On-Line Spreadsheets Pitch 1: Numbers – Market Size Focus Pitch 2: Customer Focus SKMurphy, Inc. (www.skmurphy.com) 2010 5

Pitch 1: Typical Pitch:

Pitch 1: Typical Pitch $8 B Market 300-500 Million Excel Seats Worldwide Product Mix Corporate $5 B Small/Medium Business $2 B SOHO/Personal $1 B SKMurphy, Inc. (www.skmurphy.com) 2010 6

Pitch 1: Five Year Projections:

Pitch 1: Five Year Projections SKMurphy, Inc. (www.skmurphy.com) 2010 7

Pitch 1:Our Powerful Features:

Pitch 1:Our Powerful Features SaaS Edit Cells Macro Support Addon Store Visual Basic Templates 10 Cursor Styles SKMurphy, Inc. (www.skmurphy.com) 2010 8 Click & Drag Cell Merge Auto Fill Multiple Sheets Shortcuts Support 50 Charts Database Interface

Pitch 1: 2% of $8B:

Pitch 1: 2% of $8B This is a 160M Market! Your $4M Gives You 10% Value at Exit 10 x Sales (160M) = 1.6B 10% of 1.6B = 160M For a 40X Return Product Mix / Channels Internet Direct Sales $120M Reseller (ISP) Sales $40M SKMurphy, Inc. (www.skmurphy.com) 2010 9

Pitch 2: Understanding Your Market:

Pitch 2: Understanding Your Market Problem: Team Sharing a Spreadsheet Current Solution: Emailing Spreadsheet Who has the Latest Copy Cannot Read Your Version Old New SKMurphy, Inc. (www.skmurphy.com) 2010 10

Pitch 2: Trends Making This Worse?:

Pitch 2: Trends Making This Worse? Global Team Remote Workers Work from Home SKMurphy, Inc. (www.skmurphy.com) 2010 11

Pitch 2: Our Initial Niche:

Pitch 2: Our Initial Niche High-tech Global Teams Why Them? Early Adopters Global Pain to IT Team Crosses Administrative Boundaries Need to Punch Holes in Firewall for Suppliers SKMurphy, Inc. (www.skmurphy.com) 2010 12

Pitch 2: Understanding Excel Trends:

Pitch 2: Understanding Excel Trends SKMurphy, Inc. (www.skmurphy.com) 2010 13

Pitch 2: Team Productivity Is A New Curve:

Pitch 2: Team Productivity Is A New Curve SKMurphy, Inc. (www.skmurphy.com) 2010 14

Pitch 2: Why Us Not Microsoft?:

Pitch 2: Why Us Not Microsoft? IT is Microsoft’s Biggest Customer IT Okay With Email Solution IT Does NOT Want To Solve This Issue Annoyance to IT SaaS Model vs Desktop SKMurphy, Inc. (www.skmurphy.com) 2010 15

Pitch 2:Growth Beyond Initial Niche:

Pitch 2:Growth Beyond Initial Niche $8 B Excel Market Will Grow Based on Focus on Team Needs SKMurphy, Inc. (www.skmurphy.com) 2010 16

Which Pitch?:

Which Pitch? SKMurphy, Inc. (www.skmurphy.com) 2010 Number – Market Size Focus Customer Focus 17

What Makes Pitch 2 Compeling?:

What Makes Pitch 2 Compeling? Clear Understanding of Customer Problem Target Group Poorly Served By Status Quo Trends Making This Worse Initial Niche – Just The Start Everyone Agrees Market Is Big Second Group Has Clear Focus: Teams Not Just Moving Excel to SaaS SKMurphy, Inc. (www.skmurphy.com) 2010 18

How To Explore The Market:

How To Explore The Market What You Need To Determine Will Customers Pay For Your Solution? How Many of them Are There? How Can You Differentiate Yourself? What Are Alternatives You Need to Position Against SKMurphy, Inc. (www.skmurphy.com) 2010 19

Large Company Approach:

Large Company Approach Market Research Market Analysis Market Sizing Competitive Analysis Opportunity Assessment Interviews / Focus Groups SKMurphy, Inc. (www.skmurphy.com) 2010 20

Startup Customer Development:

Startup Customer Development Leverage Resources Of Your Team In Particular Social Capital Use Social Navigation SKMurphy, Inc. (www.skmurphy.com) 2010 21

Trusted Feedback Is Essential:

Trusted Feedback Is Essential Forget Gartner: Talk to 30 People With Knowledge of Market and/or Technology These are NOT Sales Calls Spend Social Capital to Ask Do You Have This Problem? Tell Me More About Your Problem Is This Solution Interesting? Is It Compelling? What Doesn’t Work? How To Improve? SKMurphy, Inc. (www.skmurphy.com) 2010 22

How To Reach a Target Customer?:

How To Reach a Target Customer? SKMurphy, Inc. (www.skmurphy.com) 2010 Target Customer You 23

Social Navigation:

Social Navigation Networking With a Goal Clear Criteria For Target (Updated As You Go) Costs Spending / Enhancing Established Trust Transactions Introductions Serious Conversation Follow-Up SKMurphy, Inc. (www.skmurphy.com) 2010 24

Social Capital:

Social Capital Relationships & “People Skills” Prior Shared Success that You can Reactivate You Will Spend Social Capital On Trusted Feedback Finding Prospects Early Sales SKMurphy, Inc. (www.skmurphy.com) 2010 25

Navigating To Trusted Feedback:

Navigating To Trusted Feedback SKMurphy, Inc. (www.skmurphy.com) 2010 26

Word of Caution: Don’t Start with a Broadcast :

Word of Caution: Don’t Start with a Broadcast Email, Forum Posting, etc.. This Is Junk Mail Addressed to “Occupant” Least Engaging, Least Energizing It Doesn’t Build Relationships You Know the Least, Message is Weakest Selection Criteria Still Fuzzy SKMurphy, Inc. (www.skmurphy.com) 2010 27

A Serious Conversation Is Always An Opportunity:

A Serious Conversation Is Always An Opportunity Most New Products are Incomplete What’s Missing To Make it Compelling What Other Problems are Top of Mind? If They Ask For Help On Another Problem Carry More Than Your Own Bag Vector Them Inside Your Firm Introduce Them to Other Firms SKMurphy, Inc. (www.skmurphy.com) 2010 28

Outcomes From Conversation:

Outcomes From Conversation Do Not Have Need / Problem Not a Fit – Revise Target Selection Criteria Have Problem, No Interest in Solution Why – What’s Missing Or Mis-Assessed What Are They Interested In Revise Criteria Have Problem, Interested In More Info Always Close Loop With Introducer SKMurphy, Inc. (www.skmurphy.com) 2010 29

Exercise - Prior Shared Successes:

Exercise - Prior Shared Successes Make a List of Projects You Have Worked on in the Last 5-10 years Pick 6 initially but Expand Later Project Achieved Result From Teamwork Result Viewed as Shared Success SKMurphy, Inc. (www.skmurphy.com) 2010 30

Prior Shared Successes Part 2 For Each Project List People:

Prior Shared Successes Part 2 For Each Project List People Nature of Success Identify Their Contribution Use For Reconnection, Testimonial, Thanks Where are They Now? (do you have phone # or e-mail) When Did You Last Speak or E-Mail? Let’s Take Five Minutes SKMurphy, Inc. (www.skmurphy.com) 2010 31

Prior Shared Success - Debrief:

Prior Shared Success - Debrief How Did it Feel to Answer These Questions? Who Came Away With Someone They Should Re-Connect With? Circle Two People And Reach Out This Week SKMurphy, Inc. (www.skmurphy.com) 2010 32

Prior Shared Success – Next Steps:

Prior Shared Success – Next Steps Consider Updating This List Going Forward Send A Thank You Note Write a LinkedIn Endorsement Hold a Re-union of Project Team As Your Situation Changes, See If You Can Assist These Folks SKMurphy, Inc. (www.skmurphy.com) 2010 33

Market Exploration Looks Good:

Market Exploration Looks Good Buyers Not Well Served By Status Quo Clear Pain Reason Why the Problem is Getting Worse May Start Out Small Will Grow Large SKMurphy, Inc. (www.skmurphy.com) 2010 34

Example: On-line Spreadsheets:

Example: On-line Spreadsheets Not Well Served: Group Collaboration Email In Box Pain Where Is Current Copy? One Or More Team Members Cannot Read That Version Global Teams Make It Worse SKMurphy, Inc. (www.skmurphy.com) 2010 35

How Big Is The Market?:

How Big Is The Market? Bottoms Up: A*B*C = Market Size Where A = # of Customers B = Average Transaction Size C =  # Transactions Per Customer (Yearly) SKMurphy, Inc. (www.skmurphy.com) 2010 36

Challenge Can Be # of Customers:

Challenge Can Be # of Customers Part Of Your Market Exploration Titles, Professions, Business Size Where: Geography, Industry, Verticals Triggers For Buy Decision E.g. Regulatory Deadlines (Taxes) Related to Other Purchases (e.g. New Home) New Employee Hiring SKMurphy, Inc. (www.skmurphy.com) 2010 37

Distinguish Between Available and Addressable Market:

Distinguish Between Available and Addressable Market TAM: Total Available Market Total Revenue of All Competitors / Total Spend SAM: Served Available Market Also Called Addressable Market Portion of TAM You Can Actually Serve Typical Limits: Geography, Industry, Features Channels / Distribution Models Also Key SKMurphy, Inc. (www.skmurphy.com) 2010 38

About SKMurphy , Inc.:

SKMurphy, Inc. (www.skmurphy.com) 2010 About SKMurphy , Inc . We Offer Strategy and Business Development Consulting & Products Our Focus is on Software Entrepreneurs We Help Them Find Early Customers / Early References Early Revenue 39

Thanks For Your Time:

Thanks For Your Time SKMurphy, Inc. (www.skmurphy.com) 2010 40

Innovation is Psychological and Cultural:

SKMurphy, Inc. (www.skmurphy.com) 2010 Innovation is Psychological and Cultural Technology Does Not Drive Change At All. Technology Merely Enables Change. It's Our Collective Cultural Response To The Options And Opportunities Presented By Technology That Drives Change. Paul Saffo 41

Drucker on Innovation:

SKMurphy, Inc. (www.skmurphy.com) 2010 Drucker on Innovation "Innovation requires us to systematically identify changes that have already occurred but whose full effects have not yet been felt, and then to look at them as opportunities. It also requires existing companies to abandon rather than defend yesterday." Innovation & Entrepreneurship (1985) 42

Sources of Innovation: How to Systematically Search for Opportunities :

SKMurphy, Inc. (www.skmurphy.com) 2010 Sources of Innovation: How to Systematically Search for Opportunities The Unexpected The Incongruous Weak Link In Existing Process Industry Or Market Structure Change Demographics: Size, Age Structure New Zeitgeist: Perception, Mood, Meaning New Knowledge 43

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