Posts Tagged ‘competition’

This is the last in a series of three on how to build and use economic models to determine the viability of your business idea. In the previous two entries, I discussed how market sizing and segmentation and competitive market research can help you, the entrepreneur, validate initial revenue and cost assumptions and build a more robust model that can be used to feed into the financial projections of your business plan. In this post we’ll explore how “reference businesses” can contribute to the economic modeling process.

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In my last blog entry, I posed one of the first questions an entrepreneur should ask themselves before moving forward with their endeavor, “Is my good idea a good business?”

I proposed that building an economic model can be a helpful tool in answering that question. Start simple using your existing knowledge of revenues and costs. Next, validate your initial assumptions through market research. I discussed how market sizing and segmentation can help forecast demand, which is used to calculate both revenue and variable costs. Below, I will discuss how researching your competition can contribute in building and/or supporting the economic model.

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