8 Steps to Choosing the Right Market for You

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Loads of people have been asking me how I went about choosing my market and how I got to physical therapy practice owners.

Choosing the right market for can make or break your situation.

Yet many people overlook it completely and grasp at markets they’ve heard of others doing or just guess.

You can build an amazing product that solves a real problem… But if you choose the wrong market there could be:
– Not enough people to sell it to
– The market could not have enough money to pay for it
– Or you could build the product and eventually self-sabotage because you are not really interested in the market.

In this post I’ll show you how I chose my market and I’ll share a few different resources I used to learn more (including how you can use a franchise business to give you all the info you need).

Make a list of market ideas

There are 2 ways of going about this.

The first, is to list off industries you are interested in or that you think could be a good fit, then cut down your list by running them through the criteria.

The second is to start with a list that includes the data you need already and cut it down, then go from there.

Option one gives you a smaller more manageable list and probably takes less time. Option two takes more work but opens your eyes to more options. Either choice is fine.

Here are a few resources you can use to build your list. First Research Industry Profiles, IbisWorld Industry Reports, sbdcnet.org and Hoovers.com.

Those are just examples…  The key is just to look for any type of structured data that you can use to learn more about your market. Here’s an example of how you can estimate a market size on facebook in 2 minutes. http://www.youtube.com/watch?v=FGvuzIh_Q3s – Note this video is kind of lengthy… Skip to the 4 min mark.  There are other videos out there that show you how to do it… Might do my own soon.

Once you have a list the next step is to cut the list down to make sure it’s big enough and can be profitable enough to support you.

Is the market big enough to support you?

First – Cut out everything that has less than 10K businesses. Some say 5K is enough… But I wanted to make it easy on myself and frankly, had a hard time cutting my list down, so I used 10K businesses in the US alone as my criteria.

Is the market profit driven?

This is kind of an arbitrary condition… But it’s not super hard… Just think about which businesses want to grow and make money and which ones care less about that… The later are ones you want to avoid…

Also consider if the industry is growing or not. There are a lot of different ways to figure this out… Many of the lists I gave you above simply tell you if they are growing or not. But you can take it a step further by going to different job boards, like indeed.com, to see if they are hiring. If there are a lot of job posts by the market, its a good sign it’s doing well.  Use this to cut your list further.

Remove all industries that don’t interest you

Take a look at the list and cut out any of the industries you are not interested in. Or ones you are less interested in than the rest. I found it’s just easier to think about it this way first in order to cut down my list. Repeat this step until you are down to a list of 10 or so industries.

Once you have a manageable list, it’s time to gather more detailed data to make your decision.

Throw them up in a spreadsheet and list out the answers to the following questions next to them to help support your decision.

Do they make enough money to buy software?

At the Foundation we like to shoot for at least businesses that make at least 100K in revenue.  To answer this question I turned to bizben.com. Bizben lists a lot of businesses for sale and in doing that they also often list how much revenue those companies make. It’s PERFECT for figuring out how much your market makes.

Another thing you can do to learn a LOTS about your market in general is if your market has franchise businesses. Contact them and tell them you are interested in learning about opening a location. Setup a call with them and you can ask them loads of questions and they have the answers to them all…

How big is the market? Who are your competitors? How much does the average franchise make? Do you provide software? etc. etc. etc. This is a goldmine of info.

Do they currently use software?

This one is easy. Search for your industry + software in google and see what comes up. It’s pretty easy to tell if there are businesses selling software in your market. Check them out and see how many they are. Seeing them is a GOOD sign. This means people are paying for software in the market and they could buy yours too.

Can you get a decision maker on the phone?

This one is least important. The question should really be… How hard is it to get to the decision maker. With this one you can just speculate and test. Some markets like Real Estate Agents are easy whereas others like Dentists are really hard. It’s not to say that Dentists are a bad market. Once you get through to them they it could be a great market and pay off. It’s more about what you want and the kind of person you want to deal with day to day… Which brings me to the last and most important point…

Making the choice

The last criteria is to choose who you really want to work with. To do that ask yourself questions like:

Which industries do you believe in? Which ones would you love to help? Which ones would you be happy to talk to every. single. day. ???

You are gonna be in business with these people so you really have to love it.

If you don’t you may get bored and self-sabotage any success you have.

Using these questions I narrowed it to my top 3 and put those through more serious tests to find out.

Reach out to your market and have a few conversations.

The next thing you want to do is reach out to speak to a few people. I did this with 2 markets I was really interested in and met all the criteria above (Physical Therapy and Home Health).

For me, after just a couple conversations, I knew who I wanted to work with. I had a lot in common with PTs and PT practice owners and REALLY liked talking to them. It was a no brainer. So from there I went all out to contact the Physical Therapy market.

In the next post I’ll tell you how I went about contacting the market.

Get after it!

Carl

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  • Carl

    Feel free to ask me anything about this post… Happy to answer your questions…

  • http://everybodycleanup.com/ Ryan Leavitt

    Hey carl,
    I was curious if you could give me a call, My market does fit into the over $100,000 a year status but the more I think about it I think it could be a great market. I just wanted to go over some of the data I had pulled up and see what you think. my number is 435-216-8384

    • Carl

      Hey Ryan,

      Happy to chat sometime. In my getting things done mode right now, but Ill hit you up tonight.

      If I for some reason forget, email me at carl at carlmattiola.com and we can set something up.

  • Steven Cooper

    I was just about to email you and ask what your criteria was for choosing the right market. This was perfect I am going to get started today. Thanks

    • Carl

      Awesome Steven. Let me know if you get stuck.

      • Steven Cooper

        When you say 10K businesses you mean businesses that make at least 10K per month right?

        • Carl

          Hey Steven – Glad you asked because no that is not what I mean.

          You should choose markets where there are at least 10,000 businesses for you to sell too.

          For example. There are 80K PT Business, so that’s greenlight. There are 4K Food Trucks, so that misses the criteria.

          My friend Ian went ahead and did Food Trucks anyway cause he’s passionate about it and thats fine… You just have to know what you are getting into so whatever you develop can support you.

          Make sense?

          • Steven Cooper

            great thanks

          • Steve Erl

            What about a market like the Food Service Industry where no matter what city you are in it is massive….would you recommend selecting an even small niche in that market? Like smaller independent restaurants? Big chains? Fine dining etc?

  • Jasmin Fookes

    Hi Carl, I’m really inspired by your story to take action and am tremendously grateful to you for sharing your process. Towards the end of the section titled Make a List of Market Ideas you write, “Here’s an example of how you can estimate a market size on facebook in 2 minutes.” Is there a clickable link that I’m not seeing? Thanks so much for your time.

    • Carl

      Thanks Jasmin, Shit. Looks like I forgot to add the URL. Ill add it now…

      • Carl

        There you go… Just added the link… Not a huge fan of that video because its slow, but it will get the point across. Thanks for pointing that out!

        • Jasmin Fookes

          A bit of a painful video to watch for sure but a pretty great research tip. Thanks!

  • Kirsten Maitland

    Carl: Very helpful information, thank you! Quick question – did you pay for the research databases that you listed? I started my research and Industry Research charges $1500 for a membership. I’m also using the library because they have some good free resources; however, most of the databases you listed are not accessible through the library

    • Carl

      No I did not pay for anything. For some reason I am not able to find the exact source I used last year (its driving me crazy). What I will do is share my shortlist with you. This is the spreadsheet I used to choose my final market.

      https://docs.google.com/spreadsheet/ccc?key=0AopCo2KutLqldHAtWncxMW9BNHdCY3VoY2xJS3RIaWc&usp=sharing

      • David Morse

        Carl – what do the columns “Competition” and “Software Competition” mean? I see a $ amount in the cells but couldn’t understand what it meant.

        thanks,
        David

        • Chris Taylor

          Was literally just about to type the same thing 🙂 Thanks again Carl! You are too kind.

          • SiteAdmin9

            *BLANK SPACE**** Code Occupation Projected Growth (2010-2020) Projected Job Openings (2010-2020) Industries

        • Steve Erl

          Id also like to know what the values in the columns mean

        • Carl

          Hey guys,

          Sorry for the delay in answering. It was the cost per click to place ads in google adwords for those terms.

          It is not that important… What it tells you is how much people are spending to advertise software products to this market.

          A higher number in my opinion is better because it means there is money to be made and people are fighting for those spots.

          It’s also kind of cool because it means you can use that as a lead gen channel in that market.

          Make sense?

          Overall not super important though…

          Carl

          • Guest

            Cool. Thanks Carl.

          • David Morse

            Cool. Thanks Carl.

      • SiteAdmin9

        @Carl, By any chance was it this site: http://www.onetcodeconnector.org/find/family/code?s=27#27-102 –> Just joined The Foundation 2 days ago and am ready to help people !

        Here’s some stuff from Massage Therapists too, as an example: http://www.onetonline.org/link/summary/31-9011.00

        This site contains comprehensive data on every occupation listed in that Google Doc.

  • Lyla Anne

    Man I wish I checked out your blog prior to taking detailed notes from the SPI podcast 🙂 this is so awesome, you are so awesome, thank you for sharing all of this incredible information!

    • Carl

      Thanks Lyla!

  • Christoph Niebel

    Thanks for the great info Carl. Like all others I really appreciate you sharing some of the ‘lessons learned’.

    I’d be interested to understand what criteria you use to evaluate potential competition in your market, i.e.
    software products that already cater to your market.

    I understand that finding other software products is generally a good sign – when however would you decide against a market based on what you see in terms of competition? Thanks for your input.

    • Carl

      At this point I really think the more competition the better… Maybe not if you are competing with the same exact product, but in that market solving a different pain is great.

  • Sean Vestal

    Awesome Carl! What data feeds the Competition and Software Competition columns referenced in the google doc?

    • Carl

      Hey Sean,

      I wouldnt worry about that too much… It didn’t really factor in to the decision… But what I did was search for terms and use the google ad tool to see how much people were bidding for the keywords in that market… Like “Market + Software”. The higher the better.

  • Dave Ferguson

    Thanks Carl. This post is awesome!! I have been following the Foundation closely for a year or so but this is the first post I have seen that really gets into the finer details of idea extraction strategy. I have tried idea extraction with a couple of different markets that didn’t work out but reading this I realize I was kinda going about it the wrong way. I will definitely be using your tips to move forward and make things happen – Cheers man!!

    • Carl

      Thanks Dave! Keep me posted on your progress.

  • Patricia O’Sullivan

    The process described works really well. I have settled on my third market. I am a women in a man’s industry (mechanics) and I have no difficulty getting them to talk to me – I am loving it. Thanks for sharing this material.

    • Carl

      Thanks Patricia – Can’t wait to see what you extract from that market!

  • Stephanie W

    Hey Carl, I have done some idea extraction, identified a pain, and worked out a solution. However, after doing my do diligence I found that there are other applications that cover this problem… and they are free. My sample group are older and not as in touch with the latest technology. Would you move forward with a solution when you have to try to sell something that have free alternatives? Or would you try to make the application more customized for a niche within the larger market? I know this is vague but I’m hitting a wall and I’m not sure if moving forward is a sane plan. Perhaps, I should go back to idea extraction with a larger sample group – younger/urban/tech savvy. Any advice or thoughts are greatly appreciated! Thank you.

    • Lyla Anne

      Great question Stephanie!

    • Carl

      I would tell the people who don’t know about it about those solutions to add value in their lives and to try to help them out.

      Then I’d want to find someone already using those free programs to see if they like them and if there is anything they could do better.

      Meanwhile… Keep performing IE with an open mind and you will uncover more problems.

      Carl 🙂

      • Stephanie W

        Great advice! I actually told two of the people in my sample group about the application and helped them set it up! They are going to use it and let me know what they think and where it could be better OR if it is just what they need. As for your “meanwhile”, I do agree it’s time to dig deeper. Perhaps the most obvious problem isn’t the best to move forward with. We shall see. Thank you!!

        • Chris Taylor

          Stephanie,

          This is a really brave move on your part. I am sure it was probably a downer after you discovered a problem and solution and everything. Keep plugging away, you’re gonna do great!

          • Stephanie W

            Hey Chris, thank you for the encouragement. It was a downer at first but there is still a chance I might move ahead with my solution based on feedback I get from my sample group using the existing solution. Either way I choose to look at it as a good experience and am using what I’ve learned to forge ahead on a few other industries. In fact, I have found a truly under serviced industry that has a lot of potential. This time I started by putting more time into competitor analysis at the start (industry name + software), set up some demos for the existing software, and now I’m hiring VA’s to gather contact info. My goal is to send 30-50 emails a day starting asap… probably Friday or Monday at this rate. Staying busy and staying optimistic.

          • Carl

            Stephanie thats awesome. You keep that up and you will have your idea very soon.

  • Dave Ferguson

    Hi again Carl,
    In the market research spreadsheet you provide you have input $ amounts for ‘Competition’ & ‘Software Competition’ – Where did you get this information? Is it an adword $ amount?
    Thanks very much!!

    • Carl

      Don’t worry about those. Think I was putting up some adwords numbers there to get an idea of how competitive the markets are. Higher numbers are better, not worse.

  • Christine Sage

    Hi Carl, Just wanted to say thanks for sharing all the detailed info. I’m on the wait list for the Foundation so I appreciate being able to get started regardless in case something opens up. You’re inspiring… so thanks again!

    • Carl

      Thanks Christine 🙂

  • senergia

    Hi Carl, these are some great tips in finding a target market. I have done some research and am almost finished on picking a market, except for one thing.

    In my country (The Netherlands) it’s hard to find a market that has more than 5k or 10k business due the small size of the country. So the current market I have in mind complies with all the checks, except for the fact that there are around 3k business here in The Netherlands. Do you think it is still a good idea to focus on this market? Thanks

    • Carl

      It depends on your goals and it’s basically a math problem for you to solve.

      Think about how much income you need to meet your goals.

      Once you have that number you can take the total market size * 2%, assuming if you do a good job at marketing you can capture this much of the market in a few years.

      Then based on their current spending you can assume what they might pay per month for a product. Say that’s $100 to make this easy in this example.

      So 3K * .02 * $100 = $6000 per month in revenue as a goal.

      If that’s what you want then this could work out okay… If its way low then you’ve got a problem.

      Don’t forget that the 6K has some costs associated with it as well so you won’t be taking home that much.

      Also, the $100 is made up in this case because I don’t know your market 🙂

      Hope this helps

  • Benjamin Pyle

    Hi Carl, I am just getting going here. Have a lot of possible markets I am looking at. I wanted to get your take on Home Owners Associations. The market is huge (320,000) making 50 billion, but an Association is not really a business, I am not sure it is profit driven, and the decision makers are people that get voted in each year. On the other hand there are many things I can think of that would aid HOA’s serve the owners better. I appreciate your thoughts!

    • Carl

      Only way to tell is to talk to them to see what things they are buying.

      Also is there an easy way to find them?

      These are the things you need to think about…

      I might be worried about getting the sale there too… Since I’d assume several people would be involved in the decisions…

  • Carol

    Hi Carl,
    Thanks for all this valuable info. My question is: when you cut out everything that has less than 10k businesses, how would you do that step for a B2C idea? Thanks again.

    • Carl

      It’s more complex with a consumer market unless its a very tight niche that is easy to target.

      That said, it’s still a math problem.

      (Consumer Market Size * .02) * Price Per Month They Can Afford = Revenue Potential in 3-5 years. The .02 is assuming you can capture 2% of the market… This is just an estimate and can only be done in cases where its easy to find and target that market.

  • Drew Stout

    Thanks for the great post Carl. I found a list from the US Census Bureau and have started trimming it down. I didn’t realize that there were so many industries out there and I am glad that I went this route because it is in fact opening my eyes to the possibilities.

    I thought that this was going to be the easiest part of the process but I am seeing that it is not. Your article has really driven home the importance of this step also.

    Thanks,

  • LWinfrey

    Hey Carl, I just came across this post and love the content. This is exactly the information that I have been struggling to put together. I think the steps and resources you provide are excellent. I know this post is a bit old so I hope you see this because I do have a few questions.
    How do you tell what level an industry is hiring at to say if it is low, medium, or high? Do you just base it on your gut feel after looking at job postings in the industry on several job boards?
    As an example, on Linkedin there are currently 6300+ jobs posted for Recruiters. Without having detailed industry experience, how can I know that this is a high level or a low level of hiring?