The following is a market-sizing tool case study featuring Apitite, a cloud service for creating and managing APIs.
Tristan and Todd, both first-time entrepreneurs with technical backgrounds, were moonlighting on the weekends building Apitite, a cloud service for creating and managing APIs. But, before they could quit their day jobs and devote their full attention to the company, they needed to not only validate their idea, but determine the total market opportunity and potential demand for their business.
“I was spending a few hours a night looking at market data and had vague results. I needed a better data source to build confidence around the business in order to quit my job.”
– Tristan Ratchford
Tristan and Todd spent several weeks thinking about the market-sizing question and could not figure out where to start. They first looked to analyst reports to gain a broader understanding of the market opportunity, but needed more granular data on sub-segments. After hours of research and prospect calls, Tristan and Todd gained a good sense of the types of companies that would potentially buy a tool like Apitite.
Despite this anecdotal research, Tristan and Todd found it difficult to translate qualitative findings into an addressable market opportunity estimate that they could build confidence around.
To answer how many opportunities actually existed in the market, they needed a framework to quickly and accurately answer this question. Tristan stumbled across the B2B Market-Sizing Tool from OpenView while reading Quora to understand how others were approaching this question. Tristan was impressed with the tool’s utilization of US Business Census data, a source he had grown to trust throughout the course of his research.
The tool provided exactly what he was looking for – a framework and reliable data source to estimate Apitite’s market opportunity. It took Tristan less than 5 minutes to get an answer to a question he had thought about for months.
Four Market-Sizing Tool Advantages
- Provides an easy-to-understand and flexible framework to help first-time entrepreneurs think about how to size one or more B2B market opportunities.
- Opportunities can be sized in 5 minutes or less.
- Easy-to-understand reporting allows entrepreneurs to compare market opportunities side-by-side.
- Tool provides an easy-to-use interface to access the US Business Census, one of the most trusted sources of market
“Took me 5 minutes or less to get answer to a question I had been thinking about for months. The tool gave me an easy place to start and a framework to address the problem.”
– Tristan Ratchford
Want to try to the Market-Sizing Tool? Check out these tips to get started:
- Research competitor success stories and their customer logos to understand the segments competitors are successfully selling into. You can break these segments down by use case, size, vertical or any other applicable characteristic.
- Determine how the competitive product or service in question is purchased. Is it sold on a company-wide license or a user- level license basis? If it’s sold on a user by user basis with clear buyer roles, you may be better served by a different market-sizing approach. The Bureau of Labor Statistics data allows researchers to base market size on number of potential users in the market rather than total number of companies. You can learn more about this approach here.
- Define the potential segment(s) in terms of industry and employment. If you believe the potential Annual Contract Value (ACV) is the same across the board, then you can define the parameters of a single segment.
- Plug the parameters into the Market-Sizing Tool.
- Test sensitivity to your assumptions by running multiple versions of analysis.
- Apply ACV to each of your target segments to estimate market size.
The post How One Tool Enabled Two Entrepreneurs to Quit Their Day Jobs & Build Their Dream Business appeared first on OpenView Labs.