Creating an alluring opportunity takes finesse, research, number crunching and the ability to tell a compelling story while showing investors you have an empathetic understanding of your target customer.
Here are six steps to achieve just that…
Step 1: Research
Determining your market opportunity should have been done in conjunction with building your product, to know if it’s actually viable.
Good research takes one person weeks of gruelling exploration, grabbing relevant statistics, charts and creating Excel spreadsheets calculating your exact numbers.
Unfortunately, many entrepreneurs skip this critical step because they’re focused on their product and about a million other things.
This does you no favours when building a fascinating market opportunity in your pitch deck. Hiring a market research firm is most likely not in your budget.
Focus on determining the following:
- Who is your target? How many of these people exist by the numbers?
- How many people are suffering from the problem you are trying to solve?
- Look at your competitors (smaller companies not huge giants, you will not scale that quickly), determine what numbers they’re hitting. How much of the market have they penetrated?
- What’s the total available market (TAM)? Who will you then segment?
- What other products is your target audience using similar to yours? What’s their budget for this spend?
If you have deep research, you’re ahead of the game. If you’re creating this data from scratch, do a high level investigation of your customer numbers and slowly build a good research report as you go.
It’s worth understanding who your consumers are.
Step 2: Analyse the data
Now you’ve got some basic numbers, how can you turn these numbers into a page-turning story?
Start cherry-picking numbers and go from general total numbers, down to the segments. Start choosing data that shows your product will be not only viable, but there will be enough people to see an ROI.
The biggest mistake is to show too big of a market or too little. If there are only 900 potential customers and your price point is $3, investors will throw your deck in the bin.
This data should show there are a lot of potential customers who will convert to using your product and have the income to spend on it.
Step 3: Putting the data together
Now you have some good data. You need to write the story. Perhaps it is “There are 90m Americans over 55. They own 70% of the disposable income. They outspend younger generations 2:1 online and 33% own a dog.”
Your investor has the opportunity to do the maths. You have not only 29.7m potential customers, but they have money to spend and they spend online.
Highlighting these facts is important because your potential investors will come into the deck with preconceived notions about your audience: “Baby Boomers don’t go online” or “millennials are brats!”
Whatever that misconception is, you must choose exceptional facts that show you know your audience and that they have huge market potential.
Step 4: Show the story
Now you need two to four slides that not only tell but show the story.
There are several ways you can do this. One method is using an infographic style slide series that shows, using figures, the diversity and growth of what your market size is.
Use people icons to show on one slide your first market (show the smaller one first). Use colour to delineate your second market and show how huge it is.
Your reader will see huge growth and their imagination will run wild. To show vertical growth, show each vertical in different colours using the same methodology.
This concept can be shown several ways. The whole idea is to have one main concept (77m baby boomers, in this case) and then use the supporting market opportunity data as necessary.
Step 5: Build the story with pain points
Continue to build the story of your market opportunity while fusing key pain points you plan on solving.
From the mouths of your potential consumer is usually the most insightful way as it allows your investors to identify with your audience and think “wow, I know people like that!”
Step 6: Does the maths work?
You will soon reveal your price point and marketing plan. This is where the maths has to start working and you should have built a story that makes sense in the mind of the investor.
In this case, we have 90m seniors and perhaps we’ve narrowed it down to three segments with 10m each. What’s the lifetime value of the customer?
Your value per customer x the total market = TAM (total addressable market). Most institutional investors are looking at something more than a billion.
While your TAM isn’t the only thing investors look at (it’s one data point), they will definitely pass on ones that are way too small, or incredibly overestimated by an amateurish business assessment.
Once you do the segmentation however, the revenue slices become more obvious and its more relevant if you can hit your numbers.
While you’re building your market opportunity, you should be showcasing and highlighting data that supports your segments who will be interested in your product and become loyal brand consumers.
The Takeaway
Market opportunity can be a powerful tool.
Keep in mind, as you tell the story of your product and segments, investors will do their own maths and if you don’t provide the numbers and intimate knowledge of your audience, you are dead in the water.
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