Market Size Matters

When I check the background of successful companies, I see several common points. The constant iteration, emphasis on simplicity and focus on customer experience are a few of them.?

However, I think there is something more important than those common points for the success of any company.

It is the market size.

If you are an entrepreneur, you have been bombarded with information on the importance of market size. “The bigger the market size, the better” you have been told. You heard, and maybe you yourself continuously used phrases like “The total market size is around 10 billion USD. We will ONLY have 1% of the market. It makes 100 million bucks.” If you hear such claims, stay away from those people. If you use such phrases to “convince” investors, let me share my opinion to give you a different perspective.

First things first, it is much better to evaluate the market in terms of the number of potential customers, not in terms of the product of that number and the price of your product or services. Market size evaluations in terms of USD have always been subjective. You cannot generalize that a massive number of people will pay the price that you demand.

Secondly, bigger markets mean fiercer business competition. It is simply not needed. If you see competition as a necessity in business, you are wrong. It is simply not true. Competition will eat your profits. Even if you have a jump start among your competitors, it will still continue eating your well-earned profits.

This does not mean that you should have zero competitors. You have to make sure that you find a really small market. Try to find one as small as possible. Let it be 50 people. In the beginning, you should dominate this market. Dominating a small sized market is much easier than taking “ONLY” 1% of a billion dollar market.

Stay away from the competition as much as possible, but you cannot control the actions of future competitors in an open market. People who see your rise will want to try their luck in your business area. You should be able welcome those competitors, but while doing so, you should have already secured your dominant position in the market.?

Only after that you should try to expand the limits of your market. When you guarantee your domination, you can expand your operations to larger markets. That does not change the fact that you should start with a small market.?

As long as you stay away from competition and dominate your small market, you will grow sustainably.

As a reminder:

Opening a coffee shop or a restaurant is one of the surest ways to see that you will not see the potential return of the capital and time you invest in your venture. The competition is extremely high, and even if you can conceptualize a unique customer experience, your profits will be seriously affected sooner or later.

Lastly, I want to mention this: Do not repeat what has already been done if you want to see significant results. I have a favorite question from Peter Thiel: “What is the company that no one is working on but will be extremely valuable in the future?”

It will not be a replica of Google. It will not be a search engine.

It will not be replicas of Meta, Instagram or TikTok. It will not be a social media platform.

It will not be a replica of Amazon. It will not be an online marketplace.

So, we eliminate those options. Let’s also eliminate cafes and restaurants, please.

Final note:

Your customer will not buy your product because it is “unique”. Your customer will buy from you because you build trust through your dominance in your field.