Using Market Analysis to Adjust Capital Needs Accordingly

It is not uncommon for a young company to harbor unbridled enthusiasm over the prospect of landing the attention of an interested investor. After all, a cash-strapped firm may go from poring over every expense to relaxing and being able to invest in those oft dreamed-of accoutrements. It must be understood, however, that every penny of capital raised must have a purpose and be wisely allocated to ensure longevity. To do this, you must have a clear picture of what is needed, and to do this, a market analysis will benefit you greatly.

 

A Thorough Assessment

Your market analysis, put simply, takes all the guesswork out of the equation. You will learn answers to the vital questions that serve to flesh out the infrastructure in which you are operating. In this way, you can seek infusions of cash without overextending your investors and putting yourself under undue pressure to succeed in a way you have not set yourself up for. At its core, the market analysis prevents all parties from holding one another to unrealistic expectations and the results that will follow.

The market analysis provides data relating to your customer base and whether they exist in segments, and it will provide you with information as to each of these core subsets and their needs. You can plug in the total numbers of customers in a market, also referred to as TAM and multiply this by your Average Annual Revenue of a Customer in that Market. This will give you an idea of how much revenue you can potentially earn, providing a basis from which to form a budget.

 

Know Your Market

Are the people you are targeting in a small niche, or is a broader category in which you plan to do business? After you have calculated your TAM, you can then focus on opportunities for growth to add to that number if possible. You can explore whether your base is regional or whether they exist in different geographical locations. You’ll have the opportunity to delve into their buying cycles and can develop ways to upsell diehard fans, expanding your streams of income. Additionally, this tool helps you brainstorm products and services to offer in the future, as you will obtain a deep understanding of their felt needs.

An essential part of any market analysis is to assess any barriers to engaging in commerce and to devise ways of working around them. A strong knowledge of your competitors is a must, and this will help you incorporate techniques that work well and to improve on where their model falls short.

It is important to find ways to integrate yourself into the gaps the industry has failed to capitalize on, and you’ll need to distinguish yourself from those who exist in your particular niche, determining how you can present your differences as a selling point. These factors will create a launching pad from which you can clearly establish your fiscal needs at each juncture, as you work from a defined set of parameters that are based entirely on research and hard data.

Fidelman and Co. works with clients in the world of startup companies to help assist them with various stages of planning and strategy, as they achieve increasing stability and sustainability. We aid in the creation of materials used to court investors, and we also lend oversight in the areas of financial consulting and by devising management strategies tailored to suit your particular needs and industry. Reach out to us to learn how we may be of service to you, and we consider it a privilege to work hard to meet your needs.

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