Possibility: My favourite word ever! Not only does it communicate hope and opportunity, but it also has the power to anchor you, by inviting you to be realistic. When you explore possibilities, you have to explore positive outcomes, as well as risk factors and negative scenarios. It provides perspective and empowers the decision-making process. Possibility is the source of wisdom and rational confidence.
From an entrepreneurial perspective, I believe the possibility mindset is the one thing that you need to harness to build and lead a successful business. Because, a “possibility mindset” will allow you to:
- Assess different scenarios,
- Seize opportunities,
- Define various risks,
- Foresee barriers
- Then lay out options that will allow you to overcome challenges and reach your goals.
I know all this is starting to sound very conceptual and a bit too philosophical. So, let’s make sense of what I wrote above ☺ shall we?
Every year, in December, I run an annual planning workshop for the upcoming year. In that workshop there is one part where I guide people in calculating the potential “income” that they can earn with their business, in their niche market.
I have conducted this workshop several times, for many female solopreneurs and microbusiness owners, and I always wish I had a camera in the room when they finish this particular exercise.
Here is what I see in the room:
Shock, surprise, sparkling eyes, disbelief, nervous laughter, excitement, motivation, giggles, and weird sighs, a bit of hysteria and a lot of passion…
Then, purposefully, I make them take a long break. I can almost see the neurotransmitters firing in their brains and at some point, reality hits: How? How can I do it? What do I need to do? It seems too big, too much, too overwhelming… they return to the room knowing that the size of their potential earnings means change. And the idea of change creates that pesky thing called FEAR. Once that happens, it means we are ready to implement the possibility mindset and see how they could achieve what seems impossible.
This is why I love the exercise of seizing the market opportunity. Not only is it best-practice for your business marketing and growth strategies but moreover it opens up the door of possibility.
Before we get into how to calculate the size of your market opportunity, I have some rules for you:
Rule number 1: Be curious. Don’t forget, this is a possibility exercise and possibilities require curiosity to find out what, how, when, why, who? ☺.
Rule number 2: A slightly inaccurate number is better than no number: Don’t get hung up on details trying to find out the exact figure. Informed guesstimations are more than welcome and totally acceptable.
Rule number 3: We are questioning possibilities and not feasibilities. So please don’t be a party pooper! Just allow yourself to play the big dream game 😉
Now, let’s talk about how to do it. There are dozens of marketing tools and systems out there that discuss market opportunity. If you have time, please be my guest and explore some of them, some examples include:
- Porter’s 5 forces industry analysis
- PESTEL
- SWOT
- Consumer segmentation
- Analysis of direct and indirect competition
- Analysis of different similar industries
These methods are great to know about, particularly if you are a marketer or strategist, but are made for larger companies.
They mostly require market research and/or access to accurate data, and they are practiced before the launch of a new product or line to assess whether the return on investment is significant, they are too scholarly, concept-heavy and time and energy consuming for microbusinesses.
So, the method that I propose is definitely less orthodox, less accurate and most likely could be considered a short cut. And I am totally fine with this. Because, when you are a solopreneur, and you have to do the VAT for the quarter while you are writing your proposal for a potential customer and also dropping kids to the school, all you want is a shortcut.
3 phases to seize market opportunity as a micro-business owner or solopreneur:
1. Research
This is when you put your curiosity hat on and bring up your ideal customer profile.
Now your job is to find out how many ideal(ish) customers there might be in your market. The data you will find might not be 100% accurate but it will give you an understanding of the size.
Let’s take the example of my friend Annie, a wedding florist who did this exercise with me last year. The first thing that she needed to do was to define her ideal customer with precision. Here’s our short guide on how to define your ideal customer.
Annie’s ideal customer was defined as: Couples with a budget of over £50,000 budget, who want to get married in a church and are more interested in a traditional, boutique, high-end set-up, with maximum 100 guests.
This definition gives Annie enough precision to research her numbers. Now she needs to find out how many of her ideal wedding couples are getting married in her territory, per year.
For example:
- How many church weddings are there?
- How many wedding venues are there with little chapels?
- How many high-end wedding venues fit the description and how many weddings do they host per year?
She might not find the exact answers to those questions, but partial answers are good enough to practice a guesstimation exercise.
Annie came back to me and said there were approximately 350 venues fitting her criteria in the area that she wanted to cover.
Let’s have a look at the numbers:
Each venue would work around 6 months of the year, with roughly 3 weddings per week, per venue.
This gives us:
6 months X 3 weddings x 4 weeks = 72 weddings per year, per venue
72 weddings x 350 venues = 2,520 wedding couples who are in Annie’s ideal customer pool.
Annie’s average transaction value for one wedding is £1,500. This would give a market value of £3,780,000 / year in turnover.
When we worked through this thought process, although Annie knew that she was not going to capture all this potential right away, she was shocked to see how big it was.
Now let’s see how much potential is there for Annie’s current business?
2. Marketing ladder
Phase 2 is about defining the journey of Annie’s customer from being a consumer to becoming a customer.
There are 4 main steps of the marketing ladder:
Step 1: The opportunity pool: All the potential 2,520 ideal customers are in that step one.
Step 2: Awareness Those who have come across of Annie’s business. They have seen or heard about her business at least once. This means, one of Annie’s lead generation tactics (whether it was a referral scheme with a cake designer or a co-organised marketing activity with a photographer or social media or word of mouth or else) reached them.
Step 3: Interest: Annie’s business became a solution of interest for these people. For this to happen, there are 2 options, either they have come across Annie’s business more than 5 – 6 times, or they were simply exposed to strong lead generation tactics, such as word of mouth from a trusted friend.
Step 4: Leads: These are the ones who get in contact with Annie’s business, and ask for a quotation or information; the ones who enter the sales process.
Step 5: Customer: Those who finally commit and buy into Annie’s offer.
3. Conversion
This final phase is about understanding your own conversion rates to calculate your yearly business potential and clarify the weak points to maximise this potential.
Only you, as the business owner will know your conversion rates for each step of your marketing ladder. If you haven’t measured them in the past, you will probably have an intuitive answer to the following questions.
However, as a rule of thumb, in the world of microbusinesses the conversion rate increases with each step. More often, your marketing conversions, from pool to Aware, from Aware to Interested would be less strong than from Lead to Conversion.
- What is the percentage of people who might be exposed to you your marketing activities amongst your pool of ideal customers?
- How many of them were contacted more than 5 – 6 times or could have had heard about you from a trusted person? Think about how long have you been in the market, if you have been doing business for more than 5 years, chances are you have built your reputation and you have some strong word of mouth allies. If not, you are relying purely on your marketing efforts and if that is the case, your rates might be lower.
- How many interested people would actually contact you and become a real lead? In general, this step should have high conversion rates if there is urgency and scarcity. Therefore, offers and timely marketing activities can help you keep those rates high.
- Finally, easiest to measure sales conversion rates. How many leads become customers of yours?
When you put the percentages on each conversion, all you need to do is to calculate your numbers and see how much yearly revenue / clients are we talking about.
But moreover, the benefit of this exercise is not to give you a high limit, but show you the possibility there for you. In Annie’s case, the real possibility was 2,520 weddings = £3,780,00 in turnover.
Capturing this market might not be feasible with her current business, but this exercise clarifies where the weaknesses are and where conversion rates could be optimised to close the gap between the potential and reality of her business.
