How big is the market?
We want to offer managed, compliant productivity software (email, documents and chat, set up for examiners) to US credit unions. Assume:
- 3,000 credit unions have fewer than 50 employees, averaging 15 each.
- 1,300 have 50 to 500 employees, averaging 150 each.
- 200 have more than 500 employees, averaging 1,500 each.
- Every employee needs one license at $30 a month, and our management fee is 20% of the license value.
- What is the total annual license value, and what would our fees be if we served the whole market?
- Which group would you go after first, and why?
Hint
Count users first, group by group. Then think about how much sales effort each group needs per dollar.
Worked solution
Users: 3,000 × 15 = 45,000; 1,300 × 150 = 195,000; 200 × 1,500 = 300,000. Total 540,000.
License value: 540,000 × $30 × 12 = $194.4 million a year. Our fees at 20%: $38.88 million a year, if we served every credit union.
Where to start. The 200 largest credit unions hold 300,000 of the 540,000 users, about 56% of the value, in just 200 accounts. Each is a big, slow sale, but each is worth about $108,000 a year in fees (1,500 × $30 × 12 × 20%). The 3,000 smallest are worth about $1,080 a year each in fees. They can't support a salesperson's time and would need a simpler, self-service offer.
A reasonable answer: start with the largest and mid-sized groups through direct sales, and treat the smallest as a later, partner-led or self-service market. Strong answers also question the assumptions: not every employee needs a full license, many credit unions already have a provider and switch only at renewal, and "serving the whole market" never happens. A realistic target is a share of the market over several years.