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6 Step Market Potential Evaluation

   By: Cate Deans Smith


Criteria for Evaluating Business Opportunities

The following tool provides a quick indication of the market potential for your business, product or service in your area. The higher the figure at Step 6., the better the opportunity.

A low score does not mean you should drop your idea altogether. It does, however, indicate that in its current form, there is not a large market opportunity for your concept, and to enter the market in its present state you may be taking a large risk.

Likewise, a high score is not an automatic green light. Proceed with caution – check your operational and financial feasibility as well. Get second and third opinions before proceeding.




1. Are you selling to individuals, households or businesses?

2. What is the population of these customers in your target geographical location?

3. How much, in an average year, do customers spend on your product/service?

4. Find the total potential sales for the region by mulitplying (2) x (3).

5. How much is currently purchased in the region?

6. Subtract current local spend from total potential sales to discover if there is room in the market for new players?


2.Population information of individuals and households can be obtained from the Bureau of Statistics. Population of businesses might be available from local government, chamber of commerce, Bureau of Statistics, Yellow Pages or White Pages.
3.Average spend may be available from the Bureau of Statistics, Industry groups, Market Researchers (such as Ibisworld –; Euromonitor) or different levels of government.
5.Regional spend numbers may be more difficult to obtain. Try local governments, local branches of industry groups, and chambers of commerce. It may be necessary to stake out a few similar businesses and watch how much customers spend and multiply by outlets! Its also amazing how much information an unsuspecting shop assistant or manager might be happy to pass on if asked a general question about how business is going!
6.If less is being spent in your area than the calculated total potential sales figure, then there is a good chance that there is a market demand for your business in this area.

About the Author

Cate Deans Smith consults with Diess, a Business and Web Solutions Company. She has qualifications in Marketing and Entrepreneurship and Venture Development, and a decade experience in business planning, management and marketing.

Diess - "Performance through Synergy"
Diess helps businesses avoid the ineffectiveness of disjointed planning and marketing efforts that limit performance and profitability.

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