• Insights

I can already see the pitchforks and torches coming out, as marketers make note of the blasphemy in the title of this article! Bear with me for a bit, though, and I hope I can make a believer out of you.

Making assumptions is a basic skill you will need when building a business for emerging markets, India being no exception. Needless to say, vital information aids companies in making decisions. However, when you’re starting up, the skill of making guesstimates is a crucial one to develop. Why? Simply because there is often no relevant data available for most of the market segments targeted by entrepreneurs in India—now and in the near future. So, how do you go about making guesstimates? Here are some tips:

Define the Unit
Suppose you are standing in the middle of the room, and someone wants to know how tall the ceiling is. You could go with a measurement you’re comfortable with—your height, for instance. The exercise, then, is to figure out how many of you could stand, one above the other with the back to the wall, before hitting the ceiling. Similar models could be used to assess market size as well.

Parallel Industries
There’s a good chance that you won’t find the numbers you are looking for in the form of straightforward data. If that’s the case, merge two sets of data to get a fairly reasonable estimate on an overlapping segment.

Mental Math
Analysts tend to exaggerate the data they work with to make it more attractive and polarize the audience they are catering to. So, if you are picking data from reports, make sure you crosscheck that information. If someone claims that 70 percent of women are in the working class, for example, you’d know something isn’t right.

Set the Minimum and Maximum Values
In the game of guesstimates, it could get very tempting for an entrepreneur to say that he or she will own the total available market. Instead, go on the conservative side—reality would most probably be somewhere in between.

Extrapolation
Most free data isn’t current. Current data often costs money. One way to counter this problem is to take data from the past, find data on what percentage the industry is growing by (a general estimate), couple that with the rate of population growth and make an assumption.

Competitor Data
Someone I heard at a conference made this rather remarkable point: If there are companies in the same space you are operating in, subscribe to the minimum amount of shares required to get their annual reports. These reports include very detailed statistics on the market you are aiming to target. You can then add your conversion ratios accordingly.

Play this game frequently in your head. Ask yourself, for instance, how many potential water bottle companies could possibly exist in a city like Chennai (incidentally, it’s close to 480—the highest density of water companies in India)? Or how many swimming pools could possibly exist in the city you live in? How you get to these answers is a skill worth nurturing.

VIJAY ANAND is the Founder of Proto.in and the Vice President (Incubation) of IITM’s RTBI.

©Entrepreneur January 2011

Tags:
emerging markets, guesstimation, market strategy, Vijay Anand