When you run a business, you should always be on the lookout for new market opportunities. Finding one can help grow a company and take it to new heights. However, many enterprises don’t know how to seek them out. This guide is here to help.
What is a market opportunity analysis?
A market opportunity analysis is a thorough evaluation of the possible benefits, returns, and risks associated with a potential investment. It allows a company to make a sound decision about whether or not investing in said project would be beneficial long-term.
A market opportunity analysis takes into account all pertinent data surrounding the business’ decision to invest in additional resources and expertise to help further its success.
Who should conduct a market opportunity analysis?
A market opportunity analysis should be conducted by a cross-functional team comprised of people involved in all parts of the due diligence process.
For example, business development teams are likely to be heavily involved in identifying opportunities that might lead to new market penetration or increased revenue streams. However, the team should also include members from accounting and finance. If projects require additional funding, it’s these people who can determine the feasibility of obtaining those funds.
If future projects are expected to be financed using internally generated cash, members from treasury or risk management could also be part of the analysis team.
You might want to consider other ways to increase turnover before looking at new opportunities, perhaps investing in existing aspects of your business first. For example, simple things like learning how to run a webinar can help SaaS companies to significantly increase conversions.
How to conduct a market opportunity analysis
In this section, we’ll walk through the steps you need to follow to perform an analysis.
Identify potential opportunities
Identify which projects have the most profit potential. These are the investments that should be considered first.
Understand the customer
Look at the market and the company’s current customer base. These might be primarily based online or on social media or they may frequent your physical stores. How much do they spend? What types of products or services do they use? What’s the competition like and what can you offer that your competitors don’t?
Research competitors
Find out how competitors are offering products or services similar to those you hope to offer. How do they price their products and how often do potential customers buy from them? Competitor information can ensure your company focuses on the most lucrative projects.
Consider external factors
External factors like economic trends can affect a company’s ability to make investments. For example, an economic downturn could reduce consumer spending and limit the number of potential customers. Businesses should examine industry or market-wide events that might influence their estimated profits, cash requirements, or duration of the project.
Be aware of internal forces
Your company’s internal performance can affect your market opportunity analysis too. For example, high employee turnover could mean new hires responsible for an upcoming project might not have as much experience with your resources and processes, increasing the risk of failure. Weaknesses in current systems could also increase costs or slow down projects.
Here’s an example. If a company spends too much money on admin roles, they might want to consider a way to automate these tasks before seeking out a new opportunity. For example, they could automate a receptionist role using a hunt group.
What is a hunt group, you say? It’s a service that can reroute calls to multiple lines from a single number, eliminating the need for a receptionist to transfer or forward phone calls. This means the money you save on hiring someone for this role can be dedicated to funding a new market opportunity instead.
Determine the value of the opportunity
Once you’ve conducted your market opportunity analysis, you’ll be able to determine whether or not an investment will be beneficial. You should break down both its benefits and risks. The more detail you have, the better-informed your decision will be.
Make a final decision
Did your analysis show investing in a project or expansion is feasible and will lead to positive outcomes? If so, congratulations! You’ve just made a smart decision.
What are the benefits of a market opportunity analysis?
A market opportunity analysis helps to ensure investment decisions are based on accurate and up-to-date data. It also helps to identify potential risks before committing. This reduces the chance of investing in unsuccessful or unprofitable projects and initiatives.
A market opportunity analysis helps businesses to:
Make better long-term strategic decisions
By being aware of current customer needs and knowing which markets have the greatest potential for expansion, businesses can meet demand profitably. This is an important future-proofing strategy.
Create a strong competitive advantage
Understanding market opportunities can help companies differentiate their products from competitors. This allows them to get ahead in the market by offering something unique.
Make internal changes
Businesses can use market opportunity analyses to identify areas where their current resources are over or underutilized. An analysis could lead them to reallocate internal resources, improving overall project success. Market opportunity analyses can also help companies identify problems in the supply chain. They can then implement plans to resolve these issues.
Identify new business opportunities
Market opportunity analyses can help businesses develop a growth mindset. The information they discover can lead them to create innovative products or services that meet consumer demand, boost revenue, and capture a greater market share.
Evaluate product or service demand
Market opportunity analyses can help companies decide whether or not to expand into new markets. By knowing which products or services are in high demand, they can bring them to the market first and capture a larger portion of that market. For example, a business might realize enterprise VoIP is in much higher demand than traditional phone systems.
Outline potential risks
Analyses help businesses identify possible problems and risks before they invest. This allows them to plan for potential setbacks and invest only in worthwhile projects.
Identify potential marketing strategies
Market opportunity analysis can help companies identify which strategies to use to promote their products or services too, based on the demands of different markets. For example, they could try marketing channels that are currently underutilized in certain sectors but popular in others. This may allow them to expand into target markets more quickly and efficiently.
Conclusion
Businesses can use a market opportunity analysis to make informed, well-rounded decisions. These help companies reduce risk by showcasing the benefits and dangers of making an investment.
Market opportunity analysis also gives businesses a greater understanding of customer needs and the current market, allowing them to position themselves as innovative leaders in their field. Isn’t it time you took advantage?
