Ep: 002 July 24, 2020
Size Matters When Selecting Counties for Vacant Land Investing
In today's podcast, we're going to talk about market sizing and ask that all important question. Does size really matter? In business? You bet it does.
We want to go where the opportunity is. Understanding how to do market sizing is really important. You want to get this information right. There's three concentric circles you need to consider.
The biggest circle is the total available market. Sometimes this is also called the total addressable market. How many people or how many businesses are there that could potentially buy what it is you're selling in total?
Then there's the circle in the middle, which we call the service available or the served available market. This is the subsection of the marker that is interested in your product.
The smallest concentric circle in the middle is what we would call the share of market which is okay within that market of people who would actually buy it, what share of the market can I reasonably get?
When you go to size a market, there's two ways that you can do it. You can do a top down analysis or you can do a bottoms up analysis. The top down analysis depends on secondary research. You're looking at big, broad based numbers to come up with your answer.
The bottoms up analysis is much harder, but it's actually much more accurate. Using Census Bureau information you discover in detail all the relevant information you need. Using that data you create lists of all the sub-markets you want to go after. Then you add them all together and that's the total available market.
Using a service like Zillow you can look at the size of the county. Look at the total number of properties available. Then look at how many are for sale and how many were actually sold. If there's a reasonable balance, that might be a county you’re interested in.
As you're starting out, you know, it takes a while to develop all the skills. There are people in the industry who keep their portfolio diverse, but make a lot of money by really focusing on a certain area. Maintain a diverse set of areas and property types because then you've got a broader audience to market to. You should always be selling something if you've got a diverse inventory.
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