Section F: Quick and Dirty Number Crunching
Earlier I mentioned the traditional way of starting a business, which includes tedious research and analysis, such as the SWOT analysis. And, as I mentioned, there’s nothing really wrong with this sort of analysis… except that it takes too long. What we want to do is spend a few hours at the computer, crunch a few numbers, and make a quick decision about whether you have a seven-figure business idea or not.
So, set aside the idea of spending weeks analyzing the market potential. Instead, grab a calculator and let’s figure it out right now.
I know, you were hoping this course wouldn’t require math. The good news is that you don’t have to do anything hard, like figure out when two trains will meet if one leaves New York City with a tail wind and the other leaves Los Angeles with a hefty load of Sumo wrestlers.
No worries, nothing like that. Instead, we’ll crunch numbers in three easy steps. Namely:
Step 1, you estimate your prospect pool.
Step 2, you estimate the value of this market as a whole.
Step 3, you estimate how much this market is worth to you.
Let’s look at each of these steps more closely.
Step 1: Estimating the Prospect Pool
What you’re going to do for this step is take some of the data that you uncovered in the preceding sections. For example, take a look at just the Facebook data and what sort of audience Facebook estimates for your market.
You can certainly look at the data from multiple sources, such as looking at the data from both Facebook and your keyword research. However, if you do this the key is to look at them separately. In other words, don’t combine them. If you combine them, you won’t get accurate numbers.
Here’s why: if someone is on Facebook showing an interest in your topic, that same person is probably also searching Google for keywords related to that interest. Problem is, you have no idea how much overlap there is.
Let me give you an example: If you see a reach of 200,000 on people Facebook who’re interested in knitting sweaters for hamsters… and your main keyword is searched 200,000 times in Google, that doesn’t mean you have a prospective market of 400,000. That’s because you don’t know how much overlap there is between the two sets of data.
So, again, just look at one set of data at a time, such as Facebook’s estimated reach.
Let’s say for illustration purposes that you want to find out how many people have an interest in the topic of “small business” on Facebook. Using the advertising platform tool, Facebook suggests you’d have an audience of 1.9 million people.
Now let’s carve off a smaller segment of that population. Let’s suppose we want to look specifically at how many people are interested in mobile marketing. Facebook gives us an audience of 174,960. Much smaller than the overall market – so let’s see if our idea is viable.
Take note of these numbers and move on to the next step.