How To Tell Whether A Market Is Worth Entering

Business plans open with market size because it is the easiest figure to find and the most impressive to quote. It is also close to useless on its own, because you will not serve the market — you will serve a specific part of it, in competition with people already there.

Ask who currently solves this

Every problem worth solving is already being addressed somehow, even if badly, even if by a spreadsheet and a person doing it manually. Identify the current solution honestly.

If the honest answer is that people tolerate the problem, that is important information: you are not competing with a product, you are competing with indifference, which is harder.

Then ask what switching costs

A better product does not win if switching is painful. Migration effort, retraining, contractual commitments and the risk of change all favor the incumbent.

The practical implication is that a new entrant generally needs to be substantially better on a dimension the buyer cares about, not marginally better overall.

Then ask how you reach them

A viable market requires a route to customers you can afford. Many attractive markets are unreachable for a new entrant because acquisition channels are expensive, controlled by incumbents, or dependent on relationships built over years.

Work out the realistic cost of acquiring a customer and compare it to what a customer is worth over their life. If that comparison does not work at small scale, scale rarely fixes it.

Then ask what happens when you succeed

If your entry works, what do the incumbents do? A market where success invites immediate imitation by a larger competitor with distribution requires something durable — a relationship, a data advantage, a cost structure they cannot match.

The test

Find ten potential customers and try to sell to them before building anything. Their response answers all four questions faster and more reliably than any amount of desk research.