Determining whether a market is strong enough to carry your start up http://bit.ly/i5MG0A

One of the most difficult judgements a start up entrepreneur has to make is sizing the market for their products. Your product can be applicable to every household in the US, but that doesn't translate to your market size directly.

There are lots of constraints that costs impose on the market size of a product, especially for a start up. In addition to costs, there are other barriers, such as the level of competition, the relationship that the other competitors have with retailers and customers, the cash that competitors have relative to you, and so on.

It's important to be aware of the constraints to achieving your start up's full potential market size, as knowledge of these constraints can ensure you don't burn too much cash too quickly by over-anticipating the take-up of your product.

Conservatism in your estimates is important. In the internet sector, many start ups simply give their product away for free for the first months, with no expectation of revenue. Some that do so are venture capital funded, and have a relatively patient business plan and the deep pockets that this requires. For many companies however, this is not an option.

In the upcoming series of articles, I'll look at ways of sizing your start up's market size using a constraint-driven approach. A typical management consultancy or investment banking case study will talk about making macro estimates for a whole market, contingent on assumptions. These macro assumptions just don't apply to a a start up. Your available cash and rate of service will determine your a start up's market size, rather than a hazy and huge mass of 'customers' from an overblown estimate. But even rate-of-service based assumptions are not sufficient for technology companies whose main sales and marketing channel is online, as the economics differ.

These specialised cases are dealt with in this series. To find out more about how you can size your start-up's market, sign up now.

Management consultancy or investment banking case studies ineffective for sizing startups http://bit.ly/i5MG0A

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Sizing a start up's market using a constraint-driven approach http://bit.ly/i5MG0A

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How To Determine Market Size For Your Start Up - The Google Keywords Way, Part 4: The Risks of SEO

As mentioned in earlier posts in this series, traffic via SEO and pay-per-click is important in the early stages of your start up when you have relatively few channels for selling your product. In order to avoid a cash crunch and failure of your start up, you may want to be sure that your market is going to be big enough to create organic traffic.

Start up SEO need not be difficult, but mind the cost vs benefit

As a rough approximation, if your start up pursues a combination of social media, article marketing, forum and blog commenting and publishes articles daily without fail, there is a good chance that after 3 months or so, you will rank at number 1 for a search term that has a competition level of 0.01. But that takes a significant resource investment, so you have to consider whether your business model has sufficiently low risk for you to get a positive return on that investment. Low conversion rates and low prices for your start up's product can make organic SEO a good way to lose money.

Key risk 1: accurately measuring your start-up's competition and market potential

Google Keywords ranks competition for PPC, rather than competition in for organic search rankings. But you can use the competition for PPC as a good proxy for the level of intensity of organic SEO competition. Why? Because companies resort to PPC when they think that organic SEO is not sufficiently cost-effective, timely, or doesn't generate the traffic levels that they need - i.e. that there is too much competition. So a low level of PPC competition will tell you that there is still some room for organic SEO-based growth.

Reduce risk 1 for your start up: use a consultant

How far up the rankings you get depends on how much money you spend, and that will in turn depend on your sales volume, cost and profitability. To get analysis done on this, you may want to use a consultancy such as Exceltasks, which is very cost-effective and gives you quick results from a few inputs.

Key risk 2: your start up may not answer the user's query, even if you're top of Google

Another factor is that organic search terms with low competition may not be related to your product in the customer's mind. They just might not see your start up's website as being the answer to their query. This is a significant investment risk when your start up does organic SEO for low competition keywords.

Reduce risk 2 for your start up: use PPC's feedback loop to measure your start up's SEO ROI

Organic SEO doesn't have as effective a feedback and analytics loop as PPC marketing does. With PPC marketing, you can test the effectiveness of your low competition, high-scoring keywords that you have discovered using the method above. This will give you a good idea of the conversion rates that you can expect and your return on investment (ROI) for SEO.

How To Determine Market Size For Your Start Up - The Google Keywords Way, Part 2

The first thing to do is to create a list of key words relating to your start up's market. What would your typical customer search for? Try creating a combination of common search terms and less common (long tail) search terms, as the latter will likely have less competition.

Step 1. Log on to Google Keyword Tool. https://adwords.google.com/o/Targeting/Explorer?__c=2457211928&__u=4142450228&ideaRequestType=KEYWORD_IDEAS#search.none

It's no good using the tool without being logged in, as it will give you different and more constrained results. If need be, sign up for a Google ID.

Step 2. Paste your search terms into the Word or phrase box. These should be anything you can think of that is related to your start up business model. Be creative. Sometimes even tangential ideas can be used. You may want to opt to show only ideas closely related to your search terms, if you have a very clear idea of what you want, or have a very specific product. Otherwise, to explore a general market space, keep this option unchecked.

Step 3. Run your query and evaluate the results. The first query will report broad results. To translate into actual search terms requires you to click on the 'Exact' under the Match Types on the left. Now you may have some useable data for your start up market sizing.

I like to check the results first to see if they are relevant. If tweaks need to be made then I may add or modify the search terms and rerun the query. Once I am happy with the broad representation, the analysis begins.

Step 4. Download all the keyword ideas as a CSV file. This will enable you to do some nifty sorting and ranking in Excel

Step 5. Once you have the CSV file opened in Excel, you should insert a new column in between the global monthly searches column and the first local searches column. Call this new column 'Score'.

What we want to do with this column is calculate a number that takes into account both competition for a keyword and the volume of traffic associated with it. We then want to be able to rank keywords according to this blended number. This will tell you a) what your start up might achieve in terms of traffic based on organic search terms and PPC b) give you an idea of the time and cost required for your start up to achieve that traffic level.

Step 6: Calculate your blended keyword score using the formula = 1/competition * traffic. Once this is done for one cell, you can copy it down the column to the rest of the worksheet.

Select all the data on the sheet by pressing CTRL Shift *, and go to Sort on the Data menu tab in Excel. Select to sort by Score, from highest to lowest.

Step 7. Highlight the keywords with the highest score that meet your start up's minimum traffic criteria as well as a maximum competition level, eg 0.01. Generally you want to choose keywords with search volumes ideally at least of at least 1,000 and competition of less than 0.01, and that are sufficiently specific to be meaningful to your customer base.

Step 8: Analysis by SEODmoz shows the traffic share of search results depending on position. If your start up reaches first position for a particular search term, you can expect over 40% of the traffic for the term to come to your site. If you achieve position 5, you can expect just 2% of the traffic. How do you know where you're going to end up? Well, the key thing to understand is that there is a correlation between the search results position that you achieve and the amount of cost that you incur to get there.

In the next post, I look at some considerations you have to take into account when using this method to size your start up's potential market.

How To Determine Market Size For Your Start Up - The Google Keywords Way, Part 2

In the last post about sizing your Internet start up, I discussed why typical market sizing techniques in consultancy or investment banking don't apply to start ups. A constraints-based technique is likely give you more realistic estimates of your start up's potential market size. This is important in the early stages of your business when you have relatively few channels for selling your product. In order to avoid a cash crunch and failure of your start up, you may want to be sure that your market is going to be big enough to create organic traffic.

I will focus on online markets sizing methods initially, which are relevant to a technology start up. If you're looking to launch your internet start up in an already established market and want vital information on:

• Intensity of competition
• Likely market size
• Effectiveness of strategic partners and marketing channels

then the Google Keyword Tool will be a useful piece of kit in your arsenal.

The Google Keyword Tool tells you the number of searches for a particular term on a monthly basis, for any particular location. It also has a competition measure for pay-per-click (PPC) adverts. The volume and competition measures, when combined, can give you some valuable insights into the potential market size of your start up.

There are caveats you have to bear in mind when using this method for your start up. The web is an ecosystem, with lots of different communities, some closed, some open. Search engines attempt to make all communities much more open and interlinked, by producing results for similar keywords on the same page.

However, a lot of big and important communities that could be vital to your start up are closed off to Google. For example, Facebook has 500 million users, but many people have private profiles which cannot be searched via Google. For communities such as these, Google is less reliable for estimating traffic, but you can still use it for approximations. Why? Because your start up is likely to focus on a couple of main marketing channels initially, of which organic searches and PPC - which the keyword tool covers - are likely to dominate.

The next couple of posts will discuss the use of the Google Keyword Tool for measuring your start up's potential market size.