How to Recognize Opportunity in a Marketplace Ep 261

Summary Notes


In this episode, the host discusses the key factors to consider when choosing a market to target for business success. He emphasizes the importance of providing value based on personal experience and outlines four critical criteria: the market's pain and need for a solution, growth potential, ease of finding the target audience, and their purchasing power. He illustrates these points with examples, including the shift from selling newspapers to masks, and the pitfalls of targeting markets without these attributes, like unemployed individuals. The host concludes that a market meeting all four criteria, coupled with the entrepreneur's ability to deliver value, sets the stage for success.

Summary Notes

Introduction to Market Selection

  • The process of selecting a market is critical for business success.
  • The speaker emphasizes the importance of choosing a market that is not dying but is either stable or growing.
  • The ability to provide value in a market is contingent on the entrepreneur's skill set and experience.
  • Personal experience in a market can lead to a deeper understanding and empathy, resulting in a better product or service.

"And as soon as he switched from selling newspapers to selling masks in manufacturing, he went from a few million dollars a year to a few million dollars a week."

This quote illustrates the dramatic impact that choosing the right market can have on a business's financial success.

"What I want to talk to you about today is a question that I get all the time, which is, how do I know I've a good market, right?"

The speaker introduces the topic of market selection, which is a common question among entrepreneurs and business owners.

"As long as the market is not dying and is either normal or growing, then which of the markets can you provide the most value to?"

The speaker provides a rule of thumb for selecting a market, emphasizing the importance of growth potential and the ability to deliver value.

Identifying Market Pain Points

  • Determining if a market is in pain is crucial for identifying a desperate need for the product or services offered.
  • Markets with pain points are more likely to spend money on solutions.
  • A "nice to have" product is less compelling than one that addresses a critical need.

"So do they have a desperate need for my product or services?"

This quote highlights the necessity of a market having a strong demand for the product or services being offered.

"A nice to have is not something people are going to take their money out and buy, especially in a ba..."

The speaker points out that products or services that are merely "nice to have" are less likely to drive purchases compared to those that meet a desperate need.

Economic Conditions Impact on Market Needs

  • Economic times influence the urgency of market needs.
  • Desperate needs surface during bad economic times.
  • Timeless needs include health, wealth, and relationships.
  • Identifying key pain points is crucial for market success.

"If we're in a good economic time when you're watching this, then that's awesome. And if we're in a bad one, then you'll know, right? So the first thing I'm looking for is, do they have a desperate need?"

This quote highlights the speaker's view that economic conditions determine the level of desperation for certain needs within the market.

"There are some things that are timeless, right? Health, wealth and relationships. Are the timeless needs of humanity, right?"

The speaker points out that health, wealth, and relationships are fundamental human needs that persist regardless of economic conditions.

Market Growth and Adaptability

  • A growing market is essential for business expansion.
  • Businesses must adapt to changing market trends to grow.
  • Example given of a newspaper company pivoting to manufacturing masks.
  • Market adaptability can lead to exponential financial growth.

"I think I've told the story of my buddy who owned the newspaper company. He could not figure out why his company was not growing and he called me up and I was like, dude, you're much smarter than I am. It's probably because you're selling to newspapers."

This quote provides an anecdote about a business that failed to grow because it was targeting a declining market, emphasizing the importance of market trends.

"And as soon as he switched from selling newspapers to selling masks in manufacturing, he went from a few million dollars a year to a few million dollars a week."

The speaker illustrates the impact of switching to a growing market, in this case, from newspapers to masks, which resulted in significant financial growth.

Market Accessibility and Targeting

  • The ease of finding and targeting a market is critical.
  • Marketing efforts are ineffective if the target audience is not reached.
  • Successful targeting involves understanding where the market congregates.
  • Associations, groups, and specific channels can help in accurately targeting the market.

"And so whenever I'm picking a market, I'm going to try and find one that I can easily target, that has associations, they have groups, they have channels they all watch, they're all congregated in one place and so that way I can cast my fishing line there and then I can hook the clients that can take a step towards me because if you can't find them, they'll never..."

This quote underscores the importance of identifying a market that is easily accessible and congregates in specific places, making it easier for businesses to target and reach potential clients.

Speaker E's Book Promotion

  • Speaker E has authored a book titled "100 million dollar offers" available on Amazon.
  • The book has received over 8000 five-star reviews and is nearly perfect in score.
  • It is priced at $0.99 on Kindle as an offer to the podcast community.
  • Speaker E spent over 1000 hours writing the book as a contribution to the community.
  • The promotion serves as a way to engage the audience and potentially create future business partnerships.

"Hey guys, real quick, if you're new to the podcast, I have a book on Amazon, it's called 100 million dollar offers that over 8005 star reviews. It has almost a perfect score. You can get it for $0.99 on Kindle."

This quote is a promotional message from Speaker E introducing their book to the podcast audience, highlighting its high rating and special Kindle price.

Identifying a Viable Market

  • Speaker A outlines four essential criteria for a viable market: pain, growth, ease of finding, and purchasing power.
  • The market must have a need (pain), be expanding (growth), be accessible (ease of finding), and have the financial ability to buy (purchasing power).

"And so one, they have to be in pain. Two, they have to be growing. Three, they have to be easy to find. Now, the fourth one is purchasing power."

This quote lists the four critical factors that Speaker A believes are necessary for a market to be viable for business opportunities.

The Importance of Purchasing Power

  • Speaker A shares a story of a friend who targeted unemployed people for resume coaching.
  • The friend's market had pain, growth, and was easy to find, but lacked purchasing power.
  • The lack of purchasing power in the friend's target market resulted in no sales.

"And so he wasn't able to have the purchasing power from this target."

This quote explains the failure of Speaker A's friend's business venture due to the target market's lack of financial resources to purchase the offered services.

Applying the Market Framework

  • Speaker A provides two examples using the market framework to illustrate its application.
  • For a relationship coach, targeting college kids may not be as viable as focusing on seniors who are looking for partners.
  • Seniors are identified as having more purchasing power compared to college kids.

"So let's say if I were a relationship coach, I was somebody who serves couples or I'm good at helping people find love, right? Well, I'm going to look for a market that has all four of these things, which means instead of saying I'm going to help college kids, for me and my service business find love, all right, instead of having that's a heart. College kids find love. What I would probably do is instead go after seniors in maybe their second half of life to find their next partner."

This quote demonstrates how Speaker A would apply the market framework to a hypothetical situation, advising to target a market segment (seniors) that meets all four criteria, including purchasing power.

Identifying Viable Markets

  • The key to success is identifying markets where you can provide the most value.
  • Personal experience in a market is highly beneficial.
  • A four-piece system or checklist is used to evaluate the suitability of a market.
  • All four components must be present for a market to be considered viable.
  • The four components are pain, findability, purchasing power, and growth.
  • Markets that do not meet all four criteria are less likely to lead to success.

"Number one, above all else, which market can I provide the most value to?"

This quote emphasizes the importance of value provision as the primary factor in choosing a market.

"If I have personal experience, that's going to trump everything."

Personal experience in a market is highlighted as a significant advantage.

"You can't just have three of them, right? In the newspaper example, they were in tons of pain, they were easy to find, and they had purchasing power. The problem is they weren't growing."

The necessity of all four components is underscored here, using the newspaper industry as an example of a market with three components but lacking growth.

"The unemployment example, they were growing, they were in pain, but they didn't have the purchasing power."

This quote illustrates a market with growth and pain but lacking purchasing power, making it unsuitable.

"The nurses and plastic surgeons example, that would be one where if I can't find them, then I can't display the ads to them."

The importance of market findability is demonstrated here, with a focus on the ability to reach the target audience.

"And then obviously, if people don't want your product at all and it's just a nice to have, then they will not buy it."

This quote points out the necessity of market demand for the product or service being offered.

"You want to make sure that you do not have one, two, three of these. You want to have all four in any market you pick, and ideally, pick a market that you already know you can provide value to and solve a problem that meets these four criteria, and you'll have the recipe for success."

The quote summarizes the comprehensive approach needed when selecting a market, emphasizing the need for all four components and the added benefit of personal experience.

Investment Decision Criteria

  • When investing in companies, the founder's experience in the market is evaluated.
  • The problem the company is solving should match the four criteria.
  • If these conditions are met, the opportunity is considered good for investment.

"I look at the founder, I see if they already have experience in this, and then I see if the problem that we're solving matches these things."

This quote highlights the importance of the founder's experience and the company's problem-solving alignment with the four criteria in investment decisions.

"And then at that point I say, you know what? I think this is a good opportunity."

The quote reflects the conclusion of the evaluation process for an investment opportunity, based on the previous criteria.

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