Demonstrating evidence of demand tends to be a major ‘blind spot’ evident among many entrepreneurs, writes Alan Gleeson, founder of Palo Alto Software and Smallbusinesscan contributor.
Providing real evidence that there is a demand for a product or service is one of the most important signals entrepreneurs can use to convey to all that there is a market for what they’re doing.
Many entrepreneurs chose not to address this (perhaps in fear they won’t find any evidence, more so than ignorance) and instead chose to build and build before launching to find their offering gets no traction.
In theory, demonstrating there is clear evidence you can point to, that there will be a demand for your product or service is easy. There is in effect a hierarchy with sales sitting right at the top.
Clearly if people are buying what you offer they are sending a strong signal that they value what you offer — the more people doing so the better the evidence.
If you have not yet got your product to market there are numerous proxies that you can use to indicate that there is indeed a viable market for what you offer.
Competition is one clear sign, as competitive industries suggest an attractive market opportunity may exist. If it is not easy for you to identify some competitors, it may be that the market you have identified is simply not viable (of course another plausible reason may be that you may be the first to identify it).
Pressing need in Ireland
For companies in Ireland, the need to demonstrate evidence of demand is particularly pressing. The domestic market is very small, and entrepreneurs need to be confident that local demand is strong enough to be served profitably, and that overseas demand can be easily fulfilled (and also in a profitable manner given the extra cost burden).
The nature and number of inquiries you receive is another good sign, where people have asked you for a product / service that does not exist/or you are yet unable to supply. Again this is a clear signal that people are interested in what you can offer.
Using the Internet is another useful means to assess demand – searching on the main keywords related to your offering will enable you to assess the landscape i.e. are their Pay Per Click (PPC) adverts displaying on Google?
If there are, it suggests others see value in the search term and are spending marketing money trying to attract those searching on the terms. Again if there are no PPC adverts displaying for the top keywords for your business it may be evidence of weak demand (or that the market calls the offering by another name).
If you cannot find evidence using the methods outlined above it may be that you are a true visionary building products that create new markets.
However, it’s probably more likely that the lack of a clear market and weak demand is a clear signal that your energies may be better focused elsewhere.
A high-risk strategy
In summary, while it is tempting for entrepreneurs to run with an idea they have, and spend countless resources in building mode, it is a very high risk strategy to adopt.
It is very important to establish up-front the level of likely demand for the product or service using whatever means you have at your disposal. If no direct evidence is available, using proxies or seeking evidence of demand for close substitutes is a good alternative.
If after this research you are not finding the necessary evidence, the risk profile of the venture has lengthened considerably and it is best to talk to some more prospective customers to ensure you are producing something enough people will value for you to create a sustainable business.
For some people this advice may seem pretty basic, however one only needs to look at the ghost estates, empty shop fronts and golf courses in administration to evidence the impact over supply and weak demand can have on a market.
This is an edited version of an article which first appeared on Smallbusinesscan, which is powered by Ulster Bank.