The Market Potential & Scalability of a Business Plan
In this second part of the series of articles for Validating an Idea for a Startup Venture, we examine market potential and scalability pertaining to a business plan for a startup venture.
So, OK, your business passes the Problem(s) & Solution(s) test. The next thing is how big is the market potential and scalability of your business.
The market potential or size of the market (or market size) is the potential of how much money your business can make.
For example, if you have a business plan to target tourists from English-speaking countries visiting Japan, then your size of market is limited to the projected travelers based on statistical sources. However, if you're also targeting tourists speaking additional languages, then the size of your market will be bigger. Further, if you business plan also works for countries beyond Japan, then your market size would be even more bigger.
In writing of a business plan, the market size has to be measured demographically and down to the Total Addressable/Available Market (TAM), Serviceable Available Market (SAM) and Serviceable Obtainable Market or Share of Market (SOM) in marketing-speak.
Scalability is a term used in the venture capital industry to determine how easy and fast it takes to expand your business into new markets.
Taking the example above of a tourist targeted business, your business is scalable if it is not specific to any country and can be replicated to new markets easily.
Startup ventures typically accept seed funding capital to build a working prototype and the initial traction. Once the business model is proven to work in the primarily market, the business accepts Series A or B funding to expand into new regions or internationally.
Investors typically like business plans with huge market potential and scalability. Your business plan needs to be able to expand into new markets with minimal effort.
This is part of of the series of articles for Validating an Idea for a Startup Venture, and continues to the next article: Competition.