Complete Definition
Market potential evaluates the size, growth rate, and accessibility of a market opportunity. It's a crucial factor in idea validation because even the best product will struggle in a small or shrinking market.
Components of Market Potential
Market Size
- Total Addressable Market (TAM) - Serviceable Addressable Market (SAM) - Current market value
Market Growth
- Historical growth rates - Projected CAGR - Growth drivers and headwinds
Market Accessibility
- Barriers to entry - Regulatory environment - Distribution channels - Customer acquisition feasibility
Scoring Market Potential
- **High (80-100)**: Large market, high growth, accessible - **Medium (50-79)**: Decent size, moderate growth - **Low (0-49)**: Small market, slow/negative growth
Why Market Potential Matters
1. Defines ceiling for your business 2. Influences investor interest 3. Affects competition intensity 4. Guides expansion strategy 5. Impacts valuation multiples
Market Timing Considerations
The best opportunities often emerge when: - Technology enables new solutions - Regulations change - Consumer behavior shifts - Cost structures evolve