Uploaded on April 3, 2008 by BottleLeaf

I just posted an example where I’d worked up an Addressable Market calculation based on fairly good data. Of course, this data isn’t usually available; or it’s really expensive.

One of the services that jbsh offer is business consultancy, mainly strategic growth plans and help with the business planning activity. So what’s the addressable market for that?

Well according to the Office for National Statistics there were 2.16 million business enterprises registered for VAT and/or PAYE in March 2008, compared to 2.10 million in March 2007, a 3.0 per cent increase. As an aside, the ONS also report a continued move towards incorporation and away from sole proprietor and partnerships, perhaps reducing personal exposure in the downturn?

VAT is only compulsory when the value of your taxable supplies goes over £67,000 which isn’t that high. The ONS also offer us a cut for businesses between 10 and 50 employees, in fact there are 196,560 such businesses. The number of employees isn’t a great measure of which companies that will engage our services, I’m really more interested in those with a strategic growth challenge, and the revenues to pay our fees.

This information is available in the handy pocket-sized 432 page document that ONS produce on UK Business: Activity, Size & Location 2008 (well I can download the pdf to my phone but I’m not sure I’d want to read it there). On page 172 is the data about geographical regions by turnover.

Those businesses turning over less that £250k probably can’t afford us. That still leaves 573,515 which is much more attractive than 196,560 so there must be a lot of businesses with under 10 employees and over £250k turnover.

The next 17 pages detail companies by region, so for my local Unitary Authorities:

Using the same criteria as above there are 8.195 businesses with a turnover >£250k in these three regions of the UK. You can do the same thing for Standard Industry Classification codes (SIC codes) within broad regions (North East, South West, etc). SIC codes don’t work for everyone but we’re not trying to identify specific clients at this point, just gather enough data to be able to say if there is a big enough potential market to sustain the enterprise. If you don’t fit one code exactly, pick a couple that make sense and interpolate.

So it turns out that if you’re selling to businesses, there’s quite a lot of data out there on how big your addressable market is. Of course, that doesn’t mean all 8,195 businesses in this area are looking for a business growth consultant, but if we can make a compelling enough case then they could be.

What markets are you in?

Is there good data?

If you think not, leave a comment and I’ll have a go at finding some sources.

Uploaded on December 2, 2006 by Stuck in Customs

Something that makes an appearance fairly early in a business plan is the addressable market size. This is usually the point where after some mumbo-jumbo you’d end up with something like “…and thus we only need 1% to secure $100m turnover.”

Mark Davies has a good post on the subject from a VC perspective but I thought I’d add some examples from real life. The first benefits from solid data, the second is more speculative.

An enterprise I’m working with have a new game for the education sector (and several others but for the purposes of this example I’m concentrating on the education sector). Education is great (as are most public sectors) because there’s so much great data out there to use. Tt doesn’t mean they’re any easier to sell into but that’s another post.

So this enterprise happens to be in Canada, and one of their markets is Quebec. Helpfully for me, the Ministère de l’Éducation du Québec has most of the data I need. With a bit of digging (and guess work, some of the better data is in French) you can find the 9 English School Boards, and 17 French School Boards. Between them there are 512,515 students in Secondary education (enrolled for Academic Year 2007/2008). Which is nice and big.

Trouble is, we’re not selling to all those students. We’re actually only interested (at the moment) in two of their 5 years at Secondary School, so we need to divide that number by 2/5 to get a more accurate number (371,739) which is still nice and big.

The next bit needs a bit more knowledge about the fundamental business model. The game is sold to a school, or school board, on a tired license model. The more licenses you buy, the cheaper the per student price. So one addressable market is to sell a single license to the whole of Quebec, ka-ching!

However, more likely is that we’ll sell to each school board separately (or even each school). Again, data is our friend here as we can find the enrolled student numbers for each School Board. Time to fire up Excel.

And so on…

Now I can apply our tiered pricing model to each School Board and see what our ‘true’ addressable market is for Quebec. Of course these numbers include special schools that might not purchase a license; equally, it doesn’t include the private school sector which hopefully will.

I could drill down to individual schools (I have the list of schools, sizes, locations, who the Principal is and contact info) but we don’t really want to cold call each school and try to sell them each a separate license as we’re in bootstrap mode and the cost-benefit just isn’t there. Early conversations have indicated that School Boards are the most likely point of purchase so that’s enough detail.

This means I can say with high confidence that our addressable market for Public Schools in Quebec is $350,250. Shake rinse and repeat for the other Provinces and Territories in Canada and (for this business model) the Public Sector education market is $3,415,300.

How confident are you of the numbers behind your addressable market forecast?

What do you do if you don’t have those numbers? Stay tuned for my next post.

What makes successful companies different? What a great research question, and one that the University of Strathclyde posited a couple years back. They followed up with 37 companies, in 8 EU countries and gathered over 1,000 stories (interview descriptions of processes and activities).

Catherine Maguire from Strathclyde was presenting their findings. They began with the CIM-OSA model of business processes (one I’m very familiar with as it formed a good chunk of my research career). Turns out my supervisor was on the advisory panel for this work also, small world!

Basically, CIM-OSA identified three key processes that all businesses do: Manage, Operate, and Support. The research focus has been around Operate (and to a lesser extent Support). The research group I was with in Plymouth did most of the early work developing a reference model for the Operate Process. Catherine was looking at the Manage process.

Being a very industry orientated researcher (probably why I wasn’t very good as an academic) I always suspected that the actually process maps were less interesting that the activities and practices they represented. In my own research I concentrated more on these activities and the social systems around them, than the formal modelling (drawing boxes & arrows).

Catherine’s group has now confirmed what we all ‘knew’ but hadn’t ‘proved’. The actual processes in successful companies are the same as for less successful companies. Successful companies are a bit more integrated; the big difference is in the “how”.

Hugh MacLeod from The Hughtrain

Or as the song goes, “It ain’t what you do it’s the way that you do it”…

There are a hundred+1 jobs to do when you’re running a business, and they’re all important. Fulfilling Orders and Getting Orders (to use process speak) are probably the most important, but I was talking to a HR exec a couple nights ago that insisted that hiring the best people was the most important because they’d then make the business work (might have been a vested interest there).

So where do you start?

The more successful companies were generally more mature in all their Manage activities but Strathclyde did find that there were around 15 activities that seemed to differentiate more successful from less successful companies.

What Catherine’s research has found is that given equal resources, and for their 37 companies, higher maturity in these 15 activities was a reliable indicator of a successful company. Catherine flashed the activities up on screen and they were largely around communication (as I’d expect) but I didn’t get a chance to write them down, hopefully I’ll be able to update this post shortly with that list.

I did ask if they’d looked at how the Manage Processes that these activities represented subsequently interacted with the Operate Processes. From a business change perspective you’re generally presented with a whole load of symptoms operationally and have to analyse your way back to root causes. This research could really help by making explicit some of the implicit links that are learned from practice.

I’m following up with Catherine to see if I can reproduce that list of Activities here together with links to the online tool they’ve developed to help companies self-rate themselves.

Personally I can’t hold 15 things in my head simultaneously; what 5 activities are embedded in your organisation that differenciate you from the competition?

Uploaded on May 22, 2007 by s_harding_uk

David Gilroy from Conscious Solutions nailed it at a Bristol Enterprise Network event last week when asked what changes he was making to his product to sell better in a recession.

“Absolutely none”. The pitch to clients is changing, however, from how a great website can enhance your offering to one that points out how a great website can retain and generate more revenue from existing clients. Moving from selling vitamins to pain relief.

Angel investors have always asked what pain you’re addressing. This advice was been given by Greg McAdoo - Partner, Sequoia Capital at Y Combinator’s 2007 Startup School, more recently by Mark MacLeod, and before and since by many others.

Which is great if you’re thinking up your new killer app. What was interesting with David was that he has a successful business and is quickly positioning his product to be that pain killing pill that people will spend money on.

I’m not working with David, but a company I am advising (Heliotrope) has a game that promotes soft skills in the education market (I’ll come back to education in a later post on markets, and we’re looking at other markets than just education). At the moment it’s a pretty vitamin offering, helping kids understand themselves and their group and getting ready for the school term ahead. However, Canada is suffering a major pain with kids dropping out of school. Part of the extensive piloting for the game was with kids at risk of dropping out. The feedback on their increased self-esteem and desire to re-engage means we’re nuancing the emphasis from vitamin benefit, towards pain relief.

We’re also looking for new sources of pain that the game can address. The game and it’s holistic benefits haven’t changed, but people buy pain relief now when they’ll pass up an opportunity to perhaps make things better in the future.

How are you positioning yourself to be an indispensable pain relief pill rather than a nice-to-have vitamin pill?

Capt Tim with London Tea Towel

On a dark and stormy Tuesday morning, with tales of economic melt down on R4, I wasn’t sure if anyone would turn up to Open Coffee.

I shouldn’t have worried, Bristolians are made of stern stuff. We even had a friendly bank manager type along to see what the excitement was about.

In addition to Andy, we had Peter Weeks from Business Link and two entrepreneurs Dave Cropley and Chris Keegan from newly formed evans & finch (holding website). Joel Hughes was back hoping to show his new social canvassing app, along with Sam, Nigel, Craig, Tom, Melissa, Mark, Janice, and apologies to anyone I’ve missed!

A fresh pot of finest ground coffee and some gluten-free chocolate cake kept everyone talking and mixing until after I had to leave.

From the conversations I flitted between there was a common thread that, while the impending financial apocalypse will hit, for most businesses it’s not here yet. The exception, as Andy admitted, is for those trying to raise or extend bank finance. Survival planning was largely around three themes that also came up at a Bristol Enterprise Network event a couple weeks back (Growth Opportunities in a Recession).

• watch the cash flow (and reduce it everywhere)
• provide an excellent customer experience (keeping existing customers is easier than finding new ones)
• innovate

These last two in particular are being exemplified by 3 Bristol companies. Mark and Tom at The Web People are using their new SWiM service-as-a-service management software to provide excellent customer experience and innovating by licensing it to other web development and management companies. Nigel at Katugas Research Services is providing excellent service through analysis reports and multi-lingual support, and innovating through budgeting approaches that help both their client’s and their own cash flow. Dave and Chris at evans & finch are also planning both consolidation of cash flow through longer term client relationships and a new service that is still under wraps.

It may be grim out there, and things will probably get worse before they get better, but there are still some great business opportunities out there.