What's your market potential?
In an increasingly competitive funding environment, how to be taken seriously by investors starts with accurately and honestly predicting your brand’s market potential.
The market potential of a brand should be within the context of the addressable market.
Evaluate yours using these three approaches:
This is the most accurate and trusted way to predict your market potential because it is based on your current performance.
Show latest period velocities (units / store / week)
List out number of future stores
Show growth rate
New customer acquisition rate
Retention Rate (% repeat)
You’ve seen this concentric circle before. You want to show total category as the biggest circle, then a segment within that category next, and your sub-segment at the core. These should correlate to what Nielsen or IRI has coded as categories and segments.
But our products don’t fit any category – we’re totally new
A lot of brands want to say they are creating a category where none exists. While a new category may be created in the future, for now, syndicated data will code you somewhere that currently exists – which should be where you are being merchandized (on the physical or virtual shelf). Go with that. This approach supports your bottom up projections.
You can get category data from primary sources
Stackline or Junglescout for Amazon
or secondary sources
Market intelligence reports like Mintel
Trade publications like Food Navigator
Industry groups like Good Food Institute
Household penetration refers to an approximation of the percent of total households that are users. It is an extrapolation based on panel data. You don’t have to get fancy Nielsen panel data to get usage and consumption rates. Commodity groups track volumes (shipments) and have studies on total household penetration, consumer purchases per month, and per capita consumption rates. Talk to your suppliers and get connected to their commodity reports.
Once you have a realistic market potential, next you want a growth strategy tied to the capital amount you are asking for in your fund raise.
More on this next week.
All my best,