In the interplay between market stories vs. market numbers, market numbers mean less than they used to. Numbers don’t stand alone, and often they aren’t even necessary. Hard numbers can be a complete waste of resources. And, in many cases, market stories matter more than market numbers.
A Specific Example
To illustrate, consider the example of Have Presence’s market intersection of businesses that value social media, want to pay for the service, and have available budget. The actual total potential market is:
- A very small percentage of the 28 million businesses that have employees (most are solopreneurs who do social media themselves, and don’t have a budget to pay for it);
- Add to than a small percentage of the 3.6 million businesses with 1 to 4 employees;
- Then add a slightly larger percentage of the 1 million businesses with 5 to 9 employees;
- Plus a still slightly larger percentage of the 633 thousand businesses with 10 to 19 employees;
- Plus a very small percentage of the 526 million businesses that have 20 to 99 employees.
Estimating the percentage is relatively easy, and is especially credible for investors and other business plan audiences with these assumptions spelled out, as in this illustration:
On the other hand, validating these estimates with primary research would be difficult and expensive. You can see how in this case, taking market stories vs. market numbers, the story matters more. It would require researching several randomized lists of business owners, or doing focus groups, or interviewing a few randomly selected sample business owners in the various categories. And how much more exact would it be than the educated guess? This kind of research is so sensitive to random lists, proper polling, and professional survey techniques that it’s hard to believe the information value, for decision-guiding purposes, would be worth the cost.
Market Stories can Validate Market Numbers
Furthermore, when and if the marketing personnel attempt to find out how many of these various subsets of business owners are engaged in social media, they’ll find radically different numbers from various surveys and blogs. One study that surveyed business owners by mail concluded fewer than 30% valued social media; another study conducted over social media concluded more than 60% value it. And when they cut the market based on owners who don’t want to do it themselves, that’s even harder. Whatever final number they get will be an educated guess at best.
When Have Presence describes its market to outsiders, what usually sticks is the vision of the overworked small business owner without enough time to do social media right. Most people who hear that description understand it. Transparent assumptions indicate that the potential market includes at least a million businesses, and quite possibly two or three million. That’s clearly a good enough estimate to validate the market and guide strategic and tactical decisions. And whether that’s actually a million businesses or more, it’s an understandable niche.
Real business plans don’t necessarily need purchased market research. Combining available research with transparent assumptions is usually the best practical guide for decisions. You can buy expensive research reports for some markets: generally high-growth markets of special interest to companies that can afford to buy expensive research reports. Even if you have budget for that, you don’t have to spend so much money. Most of the best research is what you do yourself.
Do your homework. Search the web for good quotes. Blogs, websites, magazines, newspapers, books, and market research companies publish highlights and snippets with some key numbers from research reports. It’s part of their normal business.