Early growth companies - good ones - focus on sales. A lot of effort goes into making sure the product is what customers want. The entrepreneur thinks hard about all of the components that make the buying experience just what the customer wants.
To make sure the company isn't overlooking opportunities, or to begin to understand the boundaries of the "served market," do a little math.
I always ask entrepreneurs, when they are in a selling opportunity, how often their product is appropriate for that particular situation - right features, right price and terms, and so forth.
Let's say the entrepreneur's answer is "75% of the time."
OK, now, I ask, what's your success rate? How often, when you have the right product, do you get the order?
Once again, the entrepreneur says, "75% of the time."
So, then, the company's market share must be about 55% of the market. (75% right product x 75% success rate.)
Well, no, says the entrepreneur. I sure wish it was.
Well, why not?
Because the company is not present in the vast majority of the opportunities available. If it participates in 5% of all opportunities to sell its product, its market share is more like 2%.
Taken at face value, this means the entrepreneur should begin searching for every opportunity.
That's one interpretation. And, depending on the geographic constraints of the company and the market, it may be the right one. It's also possible that our market is smaller than we had thought, and we should target our efforts in a smaller geographic area to improve our presence.
Presence can cost a lot of money - or very little. If the company sells to hospitals, it is possible to know every customer in every geography. It will still cost quite a bit to maintain enough knowledge about every hospital to be able to be present in most sales opportunities.
In some businesses, we rely upon advertising and communications as a way to ask the customer to tell us when there is a selling opportunity. Sometimes this is the only practical way to do it.
In numerically smaller markets, with relatively fewer customers, moving to a proactive program to find sales opportunities - whether with a CRM application for a sales force, calling programs, email, or the like - can yield dramatic results by taking a great product and success rate and putting it in front of an expanded customer base.
This is a simplified view of one product of course. More on the subject of more stuff to the same customers another time.