How To Measure Results — Market Viability
For years, I have provided business planning services to companies like First Republic Bank, Goldman Sachs, and the Nelson Mandela Foundation. Frequently, I see them try to assess a potential new market. Here’s the step-by-step guide I use to help them determine the financial viability of their ideas.
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If your organization has a compelling product to sell, potential customers need to know the measurable results expected by choosing you before they’ll buy. Similarly, if you are fundraising to expand your product, having clear and measurable outcomes will help entice a potential investor to fund you.
In this installment of our Market Viability series, we’ll continue a market sizing analysis by using the impact, growth, and scale of your product’s value to determine demand:
Measure Impact
To have any chance of success in a new market, you must deliver positive results to your new customers. Results are not simply hours worked or money received, instead they are a measure of an outcome or benefit. Organizations often make the mistake of touting benefits without showing data as proof. Here’s how to demonstrate your offering’s impact to entice customers:
Beneficiaries — Who benefits from your product? Be specific. (e.g. We have built 5 schools and reached 150 students between ages 10–18, resulting in 15% higher graduation rates from high school).
Audience — Who has more access because of your product? (e.g. Our learning series reaches 350 doctors per year, who would otherwise have to travel to conferences).
Outcomes — What is your organization’s progress on its long-term goal? (e.g. Our goal is to deliver voting rights education to 100% of rural cities in California, and we are already at 70% in under 2 years).
If measurable results do not yet exist for your organization, start measuring. Start simple by tracking the above impact in a spreadsheet daily/monthly/annually, or if you don’t have trackable metrics yet: create a case study from early clients. Survey beneficiaries and talk to current customers to collect this data.
Measuring impact is critical in attracting demand from target customers and determining if your expansion will be viable.
Measure Growth
Once you’ve collected stats around your organization’s impact, start to compare past periods to present.
For example:
- YEAR 1: Built 5 schools improving graduation rates for 150 students.
- YEAR 2: Built 8 schools improving graduation rates for 240 students.
- YEAR 3: Built 9 schools improving graduation rates for 270 students.
In the above example, measure growth with the following calculation:
Growth = ( (Present — Past) ÷ (Past) )
- Growth from Year 1 to Year 2 = 60% = ( (240–150) ÷ (150) )
- Growth from Year 2 to Year 3 = 12.5% = ( (270–240) ÷ (240) )
Growth slowing from 60% to 12.5% indicates that your business is at risk of stalling. When this occurs, pause to reassess the causes of the slowdown (e.g. seasonality, customer dissatisfaction). Alternatively, if growth increases over time, talk to the new customers to get a clear understanding of what’s working so you can build a repeatable process as you expand.
Measure Scalability
Scalable business ideas can be delivered to more and more customers with a fraction of the resources over time. Though it depends on the product, a binary way to calculate scalability is this — if it takes the same amount of time/money/production to deliver your product to customer #1 as it would to customer #1,000,000, your product is not scalable. Consider incorporating one of the scalable practices below before you enter the new market:
Scale with Technology/Automation — Such as onboarding, billing, payroll, employee training, or document cloud storage.
- e.g. Netflix: After its online media subscription platform was created, the incremental cost of adding additional customers became very small.
- e.g. Healthify: Software solution allows this social enterprise to help healthcare clinics and hospitals refer individuals to community & social services, and eliminating the need for time-consuming labor and in-person resources.
Scale by Outsourcing — Such as CPAs, designers, lawyers, marketing, or part-time manual labor.
- e.g. Uber: Contracted workers perform the manual labor of driving, for this ride-sharing technology company.
- e.g. Crisis Text Line: Over 3,000 volunteer Crisis Counselors enable this nonprofit to staff helplines and provide critical support to young people, multiplying efficiency and scale.
Scale by Increasing Supply — Breaking through supply limitations by increasing reserves, reducing production costs, adding producers, or innovating technology.
- e.g. Diamond Makers: Offer Cubic Zirconia to expand their supply, because diamonds are scarce plus require high-skilled procurement.
- e.g. Juhudi Kilimo: Offers loans to many smallholder farmers, allowing them to reduce their lending costs (“production costs”) and increase their supply of loans to farmers for their livestock and equipment.
Apply the above guidelines to determine if you can scale enough to create viability in the new market.
Using quantifiable results will allow you to confirm viability of your product by confirming impact, demonstrating tangible growth, and determining scalability. Start measuring to track your progress, and optimize for success with your new business idea.
In part 3 of this series we will look at how to select the right customer.
Kaego Ogbechie Rust is CEO at Foresight Advisors — working with foundations, investment firms, non-profits, and for-profit ventures — offering comprehensive support across vision & strategy, investing & financing, and operational planning during critical periods of your growth.
If you’re looking for help, contact kaego@foresightadvisors.com or visit www.foresightadvisors.com.
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Read More:
New Book Release
• The Venture Fund Blueprint — Our #1 Best Selling book helps you learn to build, launch, and grow your organization — with step-by-step guides from crafting messaging and operations to running finance and legal.
Pitch Decks & Messaging
• How to Make a Pitch Deck for Your Fund
• How to Write an Investor Update (With Example)
• How to Write a One Pager
• Building Your Fund’s Investment Thesis
Launch & Growth
• 12 Steps to Scale a Business
• The 10-Point Checklist to Launch Your Business
• A Launch Checklist for Emerging Manager Funds
Market Size & Viability
• How to Calculate Market Size
• Know Your Niche & Cost
• How To Measure Results
• The 9 Point Due Diligence Checklist for Fund Investments
Sales & Operations
• 7 Steps To Assess Your Competition
• Competitive Advantages That Last
• Developing a Go-to-Market Plan (GTM)
• 5 Ways to Productize Your Business
• Finding The Right Customer Profile
Finance, Tax, & Legal
• How To Choose a Lawyer For Your Fund
• A Simple Way to Track Your Business Finances
