Is there a viable market for your startup?

The best way to kill a startup is to build something nobody wants. But the second-best way is to build something for too small of a market.

You might have a great idea, but if only a handful of people need it – or if they’re not willing to pay – you don’t have a business.

This is where many founders go wrong. They assume solving a problem is enough. It’s not. You need to solve a problem for enough people who will pay enough money to sustain your company.

Here's how you can tell if you've got a viable startup.

The 3 Questions That Matter

Before you write a single line of code or spend a dollar on marketing, you should ask these three questions:

• 1. How many people or businesses have this problem?
• 1. How much are they willing to pay to fix it?
• 1. Who else is already solving it, and are they succeeding?

If you don’t know the answers yet, that’s okay. But it means you’re flying blind. Let’s break these down with some sharper tools.

1. How big is the market?

We’re not talking about vague dreams like “everyone with a phone.” We’re talking about actual, reachable people who will open their wallets.

A good way to assess this is with three levels of market sizing:

• TAM (Total Addressable Market): Everyone who could use your product
• SAM (Serviceable Addressable Market): Everyone you can realistically reach
• SOM (Serviceable Obtainable Market): Everyone you can actually sell to right now

Example: You’re building scheduling software for yoga instructors.

• TAM: All yoga instructors globally.
• SAM: Yoga instructors in your country.
• SOM: Yoga instructors in your region who teach more than 10 classes a week (the ones most likely to need scheduling help).

The closer you get to your SOM, the more honest your business plan becomes. If that number is only a few thousand people, your pricing has to be high to make the math work. If it’s in the millions, you have breathing room.

2. Will they pay for it?

Here’s what so many founders get wrong: they price based on what they think their product is worth, instead of what customers actually value and are willing to pay.

Price is directly tied to pain. The bigger the pain, the more people will pay to make it go away. For instance:

• If your software saves yoga instructors $10,000 per year in lost revenue, charging $1,000 per year is reasonable.
• If it only saves them a few hours of admin time, even $10 per month might feel expensive.

To assess if your market is willing pay for your product, you can go through these valuable questions:

• How much money does this problem cost them today?
• What do they currently spend to solve it?
• How urgent is the problem?

If customers aren’t spending money on a workaround today, they might not see the problem as worth solving.

3. What about the competition?

Founders often fear competition. You shouldn’t. If there are competitors making money, it usually means there’s real demand.

But you need to know where you fit. There are two common scenarios:

• If the market is crowded, you’ll need to stand out. That could be by focusing on a niche, offering a better user experience, or solving a more specific version of the problem.
• If all the competitors are failing, that’s a red flag. Either the problem isn’t real, the market won’t pay, or others have already tried and hit a wall.

Let’s dig into our yoga example. If existing scheduling tools for yoga instructors exist, but aren’t selling particularly well, then why is that the case?

Maybe yoga instructors don’t struggle with scheduling as much as you thought. Or maybe competitors didn’t build the right features. Either way, you need to dig deeper before jumping in.

How to use these to see if your startup is viable

Let’s put this into numbers with our yoga scheduling software:

• Market size: There are 300,000 yoga instructors in the country.
• Target customers: 20% teach more than 10 classes a week and need scheduling tools → 60,000 potential users willing to pay.
• Pricing: Instructors lose an average of $5,000 per year due to poor scheduling. Your software costs $500 per year.
• Revenue potential: If 10% of your SOM (6,000 instructors) adopt your product, that’s $3 million per year.

That’s a viable business model. You can then assess this against the competition to see if you have enough room to carve out a market.

But, let’s say your numbers looked like this instead:

• Only 1,000 instructors need the software.
• The maximum they’d pay is $100 per year.
• Even with 100% adoption, your annual revenue is just $100,000.

That’s not a viable business. Unless you can expand your audience or raise your pricing, there is no room for your business to grow

Final thoughts

A startup must solve a problem, but equally, it must be able to solve it at scale.

If your market is too small, your business will struggle to grow. If customers aren’t willing to pay, you won’t generate revenue. And if competitors have already failed in your space, you need to figure out why before diving in.

Get this right, and you’re on your way to building a working business.