Congratulations, you’ve discovered that great idea that no-one else has thought of. You’ve seen a gap in the market and you’re going to develop your product or service and make the gap yours. It’s your ticket to fame and fortune.

The most important question to ask yourself as you prepare to devote the time and energy to your project is this: there’s a gap in the market, but is there a market in the gap?

You need to estimate your addressable market. How many people – consumers or individual users within your business – are potential buyers of what you’re going to offer? How much would they pay for it? Would they pay on a one-off basis or would they subscribe every year? If it’s a one-off purchase then you’re starting from scratch every January 1st. If it’s a subscription model, then you can already rely on revenues come January 1st. This audience multiplied by the price is your addressable market size.

Now, how much of that market can you win? What’s your realistic market share? This market share is your total revenue from the venture. Is it enough to make it worth your while building your product or service, promoting it, and supporting it when your customers start using it?

If the likely income doesn’t outweigh the likely cost, you don’t have a market in the gap and you need to re-think.

 

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