I just posted an example where I’d worked up an Addressable Market calculation based on fairly good data. Of course, this data isn’t usually available; or it’s really expensive.
One of the services that jbsh offer is business consultancy, mainly strategic growth plans and help with the business planning activity. So what’s the addressable market for that?
Well according to the Office for National Statistics there were 2.16 million business enterprises registered for VAT and/or PAYE in March 2008, compared to 2.10 million in March 2007, a 3.0 per cent increase. As an aside, the ONS also report a continued move towards incorporation and away from sole proprietor and partnerships, perhaps reducing personal exposure in the downturn?
VAT is only compulsory when the value of your taxable supplies goes over £67,000 which isn’t that high. The ONS also offer us a cut for businesses between 10 and 50 employees, in fact there are 196,560 such businesses. The number of employees isn’t a great measure of which companies that will engage our services, I’m really more interested in those with a strategic growth challenge, and the revenues to pay our fees.
This information is available in the handy pocket-sized 432 page document that ONS produce on UK Business: Activity, Size & Location 2008 (well I can download the pdf to my phone but I’m not sure I’d want to read it there). On page 172 is the data about geographical regions by turnover.
| Turnover in £000’s | 0 – 49 | 50 – 99 | 100 – 249 | 250 – 499 | 500 – 999 | 1,000 – 4,999 | >5000 | TOTAL |
| UNITED KINGDOM | 378,930 | 543,645 | 600,325 | 268,540 | 168,465 | 155,145 | 46,505 | 2,161,555 |
| ENGLAND AND WALES | 334,810 | 494,765 | 541,430 | 240,595 | 151,270 | 139,560 | 42,090 | 1,944,520 |
Those businesses turning over less that £250k probably can’t afford us. That still leaves 573,515 which is much more attractive than 196,560 so there must be a lot of businesses with under 10 employees and over £250k turnover.
The next 17 pages detail companies by region, so for my local Unitary Authorities:
| Turnover in £000’s | 0 – 49 | 50 – 99 | 100 – 249 | 250 – 499 | 500 – 999 | 1,000 – 4,999 | >5,000 | TOTAL |
| Bath and North East Somerset | 1,295 | 1,885 | 2,095 | 880 | 530 | 435 | 140 | 7,260 |
| Bristol, City of | 2,205 | 3,380 | 3,670 | 1,690 | 1,125 | 1,145 | 285 | 13,500 |
| North Somerset | 1,380 | 1,915 | 2,005 | 900 | 510 | 450 | 105 | 7,265 |
Using the same criteria as above there are 8.195 businesses with a turnover >£250k in these three regions of the UK. You can do the same thing for Standard Industry Classification codes (SIC codes) within broad regions (North East, South West, etc). SIC codes don’t work for everyone but we’re not trying to identify specific clients at this point, just gather enough data to be able to say if there is a big enough potential market to sustain the enterprise. If you don’t fit one code exactly, pick a couple that make sense and interpolate.
So it turns out that if you’re selling to businesses, there’s quite a lot of data out there on how big your addressable market is. Of course, that doesn’t mean all 8,195 businesses in this area are looking for a business growth consultant, but if we can make a compelling enough case then they could be.
What markets are you in?
Is there good data?
If you think not, leave a comment and I’ll have a go at finding some sources.
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