Back-of-the-napkin analysis isn’t good enough for some people, as one friend illustrated, when after my last post he sent me this link to an available research report on Ice Cream in the USA to 2011.  This report, which provides volume, value, share and per-capita consumption analysis across four categories of ice cream, confirms once again what my brother, Ken, has said, “If you focus narrowly enough, and study intensely enough for a few weeks, you can become the world’s leading expert on a topic.”  If the availability of this 120-page, 530 Euro report isn’t enough to prove Ken’s claim, note on the weblink the assertion that “Customers who bought this report also bought Ice Cream in Pakistan to 2011 and Ice Cream in Argentina to 2011.   Having been to Argentina and observed the beauty of the country, I had been hoping to become the world’s leading expert on ice cream consumption in the country. Alas, the job has been taken.  I guess I will need to focus more narrowly.  Perhaps I’ll focus on the per-capita consumption of 18 oz. Porterhouse steaks.  You wouldn’t believe how much meat they eat in Argentina. In the meantime, I’m wondering, if I can get a discount on a three-country ice cream report bundle.

In a self-funded start up, finding affordable, quality data upon which to base a marketing plan can be tough.  Funds are limited, and it’s difficult, sometimes, to think about spending money to “buy a number.”  In these cases, back-of-the-napkin estimates may be good enough.  Does it really matter, if the total market is $10 billion or $20 billion, when you are a planning for $500,000 in first-year sales? Probably not. Sometimes it’s OK just to lay out some assumptions, get some anchor points, such as publicly-available census data, and make your estimates.

The need for quality market data gets a little more apparent, however, when you are seeking outside funding.  At this point, back-of the-napkin estimates won’t be good enough. An investor is probably going to want to know the source of the market estimates and will have their own opinion regarding the quality of the research firm that produced the estimates.  Estimates don’t exist for all markets, however.  Especially for emerging markets.  So, sometimes you have to have custom market estimates produced.

One entrepreneur told me recently of a “market researcher company” that had a fixed price for producing a market estimate on a new market.  The process worked like this:

  1. The client tells the market researcher company what the market is and what size they want the market to be.
  2. The market research company writes the report to match the requested size.
  3. The market research company resells the report to investors and other entrepreneurs entering the market.

In this case, you get the best expert money can buy.  But you certainly don’t get the world’s leading expert.