{"id":407,"date":"2016-10-20T14:14:02","date_gmt":"2016-10-20T13:14:02","guid":{"rendered":"https:\/\/blog.iese.edu\/entrepreneurship\/?p=407"},"modified":"2017-05-09T09:15:19","modified_gmt":"2017-05-09T08:15:19","slug":"whats-killing-your-startup-18-mistakes-to-avoid-4-confusing-an-accessible-market-with-a-potential-one","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/entrepreneurship\/2016\/10\/20\/whats-killing-your-startup-18-mistakes-to-avoid-4-confusing-an-accessible-market-with-a-potential-one\/","title":{"rendered":"What Mistakes Are Killing Your Startup? #4 Confusing an Accessible Market with a Potential One"},"content":{"rendered":"<p>When <strong>meeting with entrepreneurs and evaluating the market size <\/strong>for the opportunity they are pursuing, <strong>I often see the same mistake<\/strong>: <strong>a confusion of the accessible market with the potential market<\/strong>. \u00a0How many times have I come across this lie (as well as <a href=\"https:\/\/www.garage.com\/files\/LiesEntre.pdf\" target=\"_blank\">others<\/a>\u2026.): \u201cour market will give us $50,000 million in 2017 &#8211; look at the last report from McKinsey \/ Gartner \/ BCG\u2026 it\u2019s a huge opportunity\u2026 if we can capture just 0.01% of the market\u2026 this venture is going to be so profitable\u201d.<\/p>\n<p><strong>The mistake here is <em>to fail to understand<\/em> that the number one criterion that shapes the market size of a startup is the current resources available for growth<\/strong>.<\/p>\n<p>Let me give you a very straightforward example:<\/p>\n<ul>\n<li>We launch a <strong>women\u2019s shoes shop<\/strong> in Barcelona.<\/li>\n<li>We <strong>target<\/strong> women, between 25 and 49, able to spend a minimum of \u20ac80 on a pair of shoes once a year.<\/li>\n<li>Most business plans would use the following rational: 1 million women in the urban area of Barcelona; half of them are between 25 and 49; based on whatever market study; 60% is spending an average of \u20ac80 on a pair of shoes at least once a year.<\/li>\n<li><strong>Conclusion<\/strong>: <strong>market size is 1M\/2 = 500,000 \u2013 500,000 x 60% = 300,000<\/strong><\/li>\n<\/ul>\n<p>The problem here is that<strong> the formula does not take into account the current resources of the venture<\/strong>.<\/p>\n<figure id=\"attachment_419\" aria-describedby=\"caption-attachment-419\" style=\"width: 744px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-419\" src=\"https:\/\/blog.iese.edu\/entrepreneurship\/files\/2016\/10\/Barcelona-Entrepreneurs.jpg\" alt=\"Barcelona\" width=\"744\" height=\"264\" srcset=\"https:\/\/blog.iese.edu\/entrepreneurship\/files\/2016\/10\/Barcelona-Entrepreneurs.jpg 744w, https:\/\/blog.iese.edu\/entrepreneurship\/files\/2016\/10\/Barcelona-Entrepreneurs-300x106.jpg 300w, https:\/\/blog.iese.edu\/entrepreneurship\/files\/2016\/10\/Barcelona-Entrepreneurs-500x177.jpg 500w\" sizes=\"auto, (max-width: 744px) 100vw, 744px\" \/><figcaption id=\"caption-attachment-419\" class=\"wp-caption-text\">Barcelona<\/figcaption><\/figure>\n<p>Typically, you will start in a tiny shop, let\u2019s say 45m<sup>2<\/sup> (15m<sup>2<\/sup> of stock, 5m<sup>2<\/sup> of shelves), which has 25m<sup>2<\/sup> available for the sales floor:<\/p>\n<ul>\n<li><strong>How many customers <\/strong>can you hold in 25m<sup>2<\/sup>?<\/li>\n<li>How long will they stay?<\/li>\n<li>How many hours are we open a day?<\/li>\n<li>How many days a week?<\/li>\n<li>How many weeks a year?<\/li>\n<\/ul>\n<p><strong>These are the questions that an entrepreneur should ask<\/strong>\u2026 because the answers to those questions will shape the real market you can access.<\/p>\n<p>In this case, i<strong>ndustry standards and retails metrics can help us<\/strong>:<\/p>\n<ul>\n<li>How many customers can you hold in 25m<sup>2<\/sup>? 25<\/li>\n<li>How long will they stay? An average of 30 minutes<\/li>\n<li>How many hours are we open a day? 8<\/li>\n<li>How many days a week? 6<\/li>\n<li>How many weeks a year? 48<\/li>\n<li>25 x 2 x 8 x 6 x 48= 172,800<\/li>\n<\/ul>\n<p>Assuming that the shop is full all the time (from Monday 10am to Saturday 8pm),<strong> our maximum accessible market is 172,800 customers, not 300,000<\/strong> &#8211; it is just over half of it.<\/p>\n<p>As an aside, <strong>this example is also applicable to online business<\/strong>. Products and services do not become viral instantly. <strong>The cost of customer \/ user acquisition and the marketing \/ sales budget attached to it will be a very important (if not the number one) driver of growth and market accessibility<\/strong> in the early stage of the company.<\/p>\n<hr \/>\n<p>Posts of the series:<\/p>\n<p><strong><a href=\"https:\/\/blog.iese.edu\/entrepreneurship\/2016\/05\/23\/whats-killing-your-startup-18-mistakes-to-avoid-1-single-founder\/\" target=\"_blank\">#1 Single Founder<\/a><\/strong><\/p>\n<p><strong><a href=\"https:\/\/blog.iese.edu\/entrepreneurship\/2016\/06\/23\/whats-killing-your-startup-18-mistakes-to-avoid-2-bad-location\/\" target=\"_blank\">#2 Bad Location<\/a><\/strong><\/p>\n<p><strong><a href=\"https:\/\/blog.iese.edu\/entrepreneurship\/2016\/09\/15\/whats-killing-your-startup-18-mistakes-to-avoid-3-marginal-niche\/\">#3 Marginal Niche<\/a><\/strong><\/p>\n<p><a href=\"https:\/\/blog.iese.edu\/entrepreneurship\/2016\/10\/20\/whats-killing-your-startup-18-mistakes-to-avoid-4-confusing-an-accessible-market-with-a-potential-one\/\"><strong>#4 Confusing an Accessible Market with a Potential One<\/strong><\/a><\/p>\n<p><strong><a href=\"https:\/\/blog.iese.edu\/entrepreneurship\/2016\/12\/13\/whats-killing-your-startup-18-mistakes-to-avoid-5-and-6-launching-too-early-or-too-late\/\">#5 and #6:\u00a0Launching too Early\u2026 or too Late<\/a><\/strong><\/p>\n<p><a href=\"https:\/\/blog.iese.edu\/entrepreneurship\/2017\/03\/09\/whats-killing-your-startup-mistakes-to-avoid-7-fights-between-founders\/\"><strong>#7: Fights Between Founders<\/strong><\/a><\/p>\n<p><strong><a href=\"https:\/\/blog.iese.edu\/entrepreneurship\/2017\/05\/09\/what-mistakes-are-killing-your-startup-8-obstinacy\/\">#8:\u00a0Obstinacy<\/a><\/strong><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>When meeting with entrepreneurs and evaluating the market size for the opportunity they are pursuing, I often see the same mistake: a confusion of the accessible market with the potential market. \u00a0How many times have I come across this lie (as well as others\u2026.): \u201cour market will give us $50,000 million in 2017 &#8211; look [&hellip;]<\/p>\n","protected":false},"author":1682,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[157,78196],"tags":[373,78197,95631,80159],"coauthors":[103468],"class_list":["post-407","post","type-post","status-publish","format-standard","hentry","category-entrepreneurship","category-new-ventures","tag-business-models","tag-business-plan","tag-potential-market","tag-startup","megacategoria-mc-entrepreneurship"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/posts\/407","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/users\/1682"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/comments?post=407"}],"version-history":[{"count":11,"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/posts\/407\/revisions"}],"predecessor-version":[{"id":574,"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/posts\/407\/revisions\/574"}],"wp:attachment":[{"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/media?parent=407"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/categories?post=407"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/tags?post=407"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blog.iese.edu\/entrepreneurship\/wp-json\/wp\/v2\/coauthors?post=407"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}