Slide 5: The Market

At this point the investor should fully understand what your product does and how it meets the needs or wants of the customer or customer segments. The next question in the mind of the investor is whether this business scalable. That is, does the business have the potential to grow sufficiently to create the investors desired type and amount of value. Remember, most investors lose money or break even on 9 out of 10 businesses in which they invest. Statistically, they depend upon a single business out of 10 investments to produce sufficient profit that all of their investments collectively are profitable. So, the investor needs to know if you business has enough potential customers and the ability to generate sufficient value by selling to those customers.

Back to: Entrepreneurship

Market Size and Segments

In order to assess scalability the investor needs to know the size of the market. The market size is measured in two ways: 1) the number of customers and 2) total value of sales in the relevant market or industry. Refer back to the Feasibility Study and Market Research chapters for a review of how to estimate the market size. As you detail the number of customers and total market value, you should explain the different customer segments that exist within the market. Who are the customers in each segment and how large is each segment. Take the time to explain what are the defining characteristics of customers in each segment. That is, what attribute or characteristic makes the grouping of customers similar in their orientation to your product or service? This is important because each customer segment will potentially have a different reaction to a product or service.

Priority & Price

Also, the priority level will differ between the segments, meaning that some segments will require more marketing to convert the members into paying customers. Lastly, each segment may be willing to pay a different price. Refer back to the Feasibility Study chapter for information and how to take a weighted average across segments to calculate the average price per sale or rate per hour of service. Understanding the size and demographics of a customer segment will allow the investor to assess the potential revenue and expense associated with acquiring a customer in that segment.

Secondary Market Opportunities

The last thing that you should include on the Market slide is an explanation of any secondary opportunities that exist for the product. In many cases a particular product or service will allow the business to gain value in other ways. For example, sales of one type of product may allow for strategic partnerships with complementary businesses. Another example would be where your product or service facilitates the growth of another part of the business. If such a situation exists you should make it known to the potential investor.

Keep it Simple

As you can see, you will have to relay a great deal of information to the investor in this portion of the presentation. The temptation is to fill the slide with lots of information. As daunting as summarizing all of this information may seem, it is even more daunting to discern this information from a slide filled with statistics. As stated earlier, I recommend using no more than 5 or 6 words (perhaps accompanied by images) to cue the delivery of the information. For example, your slide could contain the following words:

4 Segments = 2M persons = $16M (annual transactions)

Survivalists - Hunters - Fishermen (Fresh, Fly, Sea)

Accessories - Government Contracts

As you can see, the market size, segments, and secondary opportunities are laid out in a clean symmetrical format. If your cause each line to appear in the slide as you are explaining the market size, segments, and secondary opportunities, then it will create a memorable impression for the investor. Further, when all the information is on the slide the investor has a holistic view of the market opportunity.