Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

Copyright © 2000 by Greenwood Consulting Group, Inc.

It’s not uncommon for the commercialization description in an SBIR proposal to indicate what portion of the market that the proposing company thinks it can capture with its new SBIR-based product or service. For example, a company may state "assuming that we can achieve a 10% market share, this would give us annual revenues of about $40 million in this $400 million market."

The problem arises when the proposer makes such a claim and does not provide a basis for the assumed market share. In the example above, why should the reader believe that this SBIR firm can get 10% of all the revenues from this market? Too many firms assume that a fraction such as this can be achieved "somehow," and leave it at that. The savvy reviewer, however, is not willing to blindly accept such an assumption. In fact, such unsubstantiated claims are so common that you can lose considerable credibility with the reviewer by making one in your proposal.

As a solution, consider deriving or estimating your market share through some reasonable process. For example, if you are developing a technology that might ultimately be purchased by state highway departments, then you might survey 10 such departments in various states to ask if they would consider purchasing your technology when you commercialize it. If four of the state highway departments express interest, then you have some basis (by extrapolation) for assuming that about 40% of the market in all 50 states is interested in your approach.

However, we know that interest does not always translate into purchases, so you might want to assume that only a half or a quarter of those who expressed interest might ultimately purchase from you. This would suggest that you might be able to reasonably capture 10-20% of the market.

Of course, there are many other factors that will influence whether you can achieve this market share. Competitors may come up with products or services that are deemed superior to yours. Consumer buying patterns or preferences may change. Regulations may favor one technology over another. Existing but inferior products may be favored over new, innovative ones because customers are invested in, and comfortable with, the existing approaches. Such uncertainties suggest that you should further understate the fraction of the market that you think you can achieve, at least until you have an opportunity to devise a thorough marketing strategy for your new product.

In summary, avoid making unsubstantiated claims about the share of a market that you think you can achieve when you commercialize your SBIR-based technology. Derive a reasonable estimate of the market share, and explain in your SBIR proposal how you came up with it. Be sure to show some level of conservatism in your estimate of market share to account for the many uncertainties that surround the level of impact that you will have in the market place, including many that are beyond your knowledge or control.