Marketplace Evaluation
Marketplace evaluation example
We are going to use the example of a Heating, Ventilation, and Air Conditioning Trades business to illustrate how you can go about doing a marketplace evaluation. You can apply the methods to any other kind of trade or service business – it’s just that the details and numbers will be different.
You need to understand how much revenue is possible in your market because it allows you to project sales for that year. If you know you are selling 5000 units and the market sells 500,000 total units each year, then you can draw the easy conclusion that you own only 1% of the marketplace. This may seem low but if you are selling each unit for $500 dollars then you are still making $2500000. But how did we arrive at these numbers and how did we determine what your market can yield? This can be done by:
- Networking with other companies in your industry to gain mutual benefit.
2. Looking at consumer/industry/business reports.
3. Extra figures from Census data or other large-scale surveys.
4. Best: using data from all three!
To illustrate how you can use the data will look at the 3rd point, drawing numbers from your city’s Census data. Since home services are based on homeownership, the census is quite reliable once we combine this with the average life of the equipment. Therefore, with these two numbers, we can predict when many homes will need new furnaces.