How to do B2B market research
*This article is part of the “How to set up your Startup B2B Sales Process in 3 weeks” series.
Once you’ve successfully built your value hypothesis you should perform B2B market research in order to:
- effectively estimate the size of your market,
- set boundaries,
- have clear expectations,
- identify and prioritize your entry points,
- as well as a common language to use in your outbound campaigns.
Estimate your market size
What is your Total Addressable Market (TAM)?
Here we aim to understand what is the total market for your product or service. It shows the maximum amount of revenue you could generate by selling into a specific market. This metric is best used to estimate the potential to grow your business.
Formulae: # Accounts in a market X Annual Contract Value (ACV) = TAM
Example: If the total number of accounts on a market is 10 000 and the ACV is 500 the TAM is 5 Million
What is the Serviceable Available Market (SAM)?
As a general rule, the TAM on its own is not an effective metric due to a number of limitations that a business has. It can be anything from geographical and industry specifics to experience and specialization. In order to properly account for this, we use SAM to objectively estimate the portion of the TAM a business could acquire.
Formulae: Target portion of TAM X Annual Contract Value = SAM
For example: If the TAM is 10 000 accounts but only 3000 are in the specific industry and geography you serve then the SAM is 1.5 Million
What is the Serviceable Obtainable Market (SOM)?
The SOM is the trickiest one especially when you’re a new startup with no previous sales track record. In such cases what we advise you to do is focus on gaining 5-10 customers in your first year (if you’re selling B2B) in order to validate your market and then calculate SOM.
The Serviceable Obtainable Market Speaks about your ability to persuade the market to choose you instead of your competitors. The SOM is most used to determine your short-term sales targets.
Formulae: Your last year market share X This Year’s SAM
Example: If your last year’s revenue was 600 000 and last year’s SAM was 1.5 Million your last year’s market share was 0.4 and if this year’s SAM is 2.5 Million then your SOM would be 1 Million.
What are the current trends and opportunities on the market?
Now that we have a numeric value that provides a quantitative picture of your market you should think about doing more qualitative research that aims to understand the current trends in your target market and opportunities that companies look for.
After over 5 years on the market working with 200+ B2B tech companies, we can say that there’s nothing better than talking with potential buyers and understanding their situation, daily priorities, pains, and solutions they’ve looked for. The next best thing is reading industry reports from data providers such as Bloomberg, Forrester and MarketWatch, and many others.
When talking about B2B market research, another source you could always use is to read through websites and social media of companies that you think could be a good fit for you. What do they talk about, what do they read and comment on.
What is the language that the market uses?
Another really useful reason is to read through company websites, employee Linkedin and other information so that you learn about their language. Look for specific words used to describe the trends you’ve uncovered. If you don’t feel like you understand your prospects well then chances are you will also not be using the proper domain language to clearly articulate your value. It’s always a good idea to “mirror” your prospects whenever possible to build up the case that you understand them and can really help.
B2B Competitor research
When it comes to B2B market research it’s crucial to identify competitors and outline clear ways you could differentiate your business from them.
Steps to identify your competitors
- I know it’s counterintuitive but when you look for competitors you first need to dig deep inside. Outline your core product or service. What keywords do you use to identify your value proposition to customers? What words do your customers use to describe your service?
- Once you have these keywords identified, the next thing would be to go online and search for these words and see what comes up. You can also use online tools to look for competitors. Tools such as Product Hunt, Clutch.co, Crunchbase, and others.
- These first two steps should give you a wide range of companies similar to your product or service. But not all companies you found are your direct competitors because of multiple reasons like geography for example.
Let’s say your company offers outsourced software development services to businesses in Western Europe. Does that mean that similar companies that target the US market are your direct competitors? – No, as their focus is directed elsewhere.
That is why you need to identify companies that are focusing on your market. The best way to do that is to research their website, portfolio of customers and where they are located, LinkedIn and other social media as well as ads they post to identify where they are focused now. This should result in a more narrowed-down list of competitors you can then make a practice of tracking and monitoring. Read what their customers say about them, analyze their marketing strategy, how they brand themselves, and price their value proposition.
What are the types of B2B competitors?
- Another important topic to use when diversifying your competitors is are they direct competitors based on your product/service or are they, competitors, based on budget? Meaning that sometimes companies have different products/services but they tackle the same budget holder and solve problems in a different way or even sometimes different problems altogether. That budget holder may have a certain amount allocated for purchasing solutions during the financial year. When you are in such a situation you are actually forced to compete for the same budget which means you need to build the case and focus on solving the top 3 priorities/pains of your buyers because otherwise you might end up more of a nice to have than must-have and pushed back for next year’s budget.
- And last but not least when we talk about competitors it is worth mentioning the topic of “Fellow companies”. Working with software service companies over the years we’ve heard these two words “fellow company” one too many times. It basically speaks about businesses that can be considered your competitors as well as your partners/vendors.
Here’s an example: If you are a software service company that builds solutions for a fintech startup. You have 10 developers but your client needs the job done within 3 months. This will require 15 developers to work full-time for that period in order to fit in the timeline. What you do is partner with a “fellow” software development company to extend your capacity with 5 more developers for the duration of the project.
When it comes to B2B competitors’ research, there are a lot of factors to take into account. But knowing the competitive landscape is crucial for an effective Startup B2B Sales Process.
The previous article of our Sales Acceleration program is about Building your B2B Value hypothesis. If you wish to continue reading, find out How to prepare your outbound B2B sales campaign in the next part.
Having difficulties with your B2B market research?
Let’s talk on a free consulting call and we can show you how to go through the relevant steps easier and faster.
Boris Georgiev is one of the co-founders of Out2Bound. As such he has worked with over 50 B2B founders helping them realize their go-to-market strategies. He is acknowledged by Forbes with the prestigious award 30 Under 30. On a daily basis, Boris tracks trends and best practices in B2B Tech sales.