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Background information: I'm looking to start an entrepreneurship. My goal is to generate a net revenue of $4000/month (for example), probably through a SaaS software offering (think GMail).

My question is: how do I tell if my market is viably large enough? I've done market research, looked at competition, pinned down an idea, and talked to a couple of people about it. It seems like (maybe) the need is there. But how do I engage in customer validation (does it solve their problem), and even then, verify that there are enough people or enough of a market out there to make this project worthwhile?

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4 Answers

up vote 3 down vote

How to tell if your market is large enough?

x = Number of customers you think you can get (be conservative).

y = The price per month you think they will pay (be conservative).

Is (x * y) greater than 4,000?

Now you might notice that x and y are fairly subjective numbers, but that's right, there is no factual answer for you here. Make a guess and move on. The chances of market size being your reason for failure is almost zero.

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up vote 1 down vote

Think of a single phrase or a few that describe the product/service you want to build, then go plug it into Google's keyword research tool. Is (monthly) search volume big? Is there high competition for those keywords?

Once your determine potential market size you still need to figure out how much of it you can realistically hope to get. Is your product unique? Is it for a niche market? Or are you entering a competitive market and hope to compete on quality and price? The answers should guide you to figuring out size of opportunity for you and your product/service.

Once you start building MVP, test early and often, and remain flexible enough to adjust your vision based on your user's experience with the product.

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up vote 1 down vote

It would help if you could specify whether it's a B2C or B2B business.

B2B: It's pretty easy to estimate your addressable market size. Just look at how many companies can potentially become your customers. There are a lot of websites who can help you with that. In general, it should not be a problem if you want to have only $4K/month.

B2C: A little bit harder to estimate, but unless you're going to offer a very specific solution, the market is probably large enough. Try Google Keywords Tool to see how many people are looking for this kind of solution. Also check out this awesome blog post by Rob Walling.

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up vote 0 down vote

You have the answer in your question test: Do customer validation, talk to a lot of people, and in the process validate size of target market, their propensity to pay for the product and an estimation of the price.

This will tell you whether or not you'll be able to meet your financial goals.

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