1. What you will learn
This lesson shows how to find a problem worth solving and how to size the opportunity honestly with numbers you can check. You will learn the signs of a problem that people pay to solve, work out a bottom-up estimate of how many customers you can reach and what they might spend, and keep your ambition matched to your resources.
2. The idea explained
A good business idea starts with a problem, not a product. A problem worth solving has several signs. It is frequent, so people meet it often. It is painful, so they care enough to act. It is costly, so they already spend money or time on it. And it is reachable, so you can find the people who have it. Ideas that fail these tests tend to be ideas that founders like more than customers do. A problem people solve today with an inconvenient workaround, a poor service or a paid shortcut is a promising sign, because it shows both need and willingness to pay.
Sizing the opportunity is the next step. Headline figures from reports, such as the size of a national market, tell you little about what you can win. A bottom-up estimate is more honest. Define the group you can reach in your first year: people in a specific area, of a specific type, whom you can name or find. Count them. Estimate how many of them have the problem, how many might use a solution, and how much each might spend. Multiply, and you have a figure that you can defend, because each factor can be checked by talking to people. Then apply a realistic share to what you can win in the first year given your time and money. The result is usually small, and that is fine, because a small, real market that you can serve well is a better start than a large one you cannot reach.
Be careful with invented precision. Every step in a bottom-up estimate has error, and multiplying errors makes the total uncertain. Give a range, not a point, and say which assumptions you are least sure of. Do not claim a market figure you cannot support. Most new ventures do not succeed, and a sized opportunity is not a promise. Take questions on licences, safety and tax to professionals. Nothing here is a forecast.
Apply it
3. How to apply it in your own business
Write three candidate problems in one sentence each, in the customer's words. For each, ask: how often, how painful, what do they do today, what does it cost them, and can I reach them? Score each from one to five. Choose the one with the highest score that you also care about and know something about.
Talk to at least ten people who have the problem. Ask about the last time it happened, what they did and what it cost. Note the amounts. Then do the bottom-up estimate. Define your first-year group by place and type. Count them using directories, associations, visits or your own counting. Estimate the share with the problem from your conversations. Estimate the share who might use your solution from conversations and any pre-order test. Estimate spend from what they pay today.
Multiply to get a monthly figure, and write a low and a high case. Apply a first-year share you could serve with your time and money. Compare with your costs and your breakeven. If the numbers do not work even on the high case, change the idea, the price or the group, or stop. Record the assumptions and the sources. Keep people's details private.
Worked example
4. Worked example
Meghna, a hostel warden in Bengaluru, sees that many young people in paying-guest accommodation struggle with laundry: they lack machines, time or space. She considers a laundry pick-up and drop service for residents of paying-guest houses. She scores it: frequent, 5; painful, 3; costly, 4 because they spend on local laundries or lose weekends; reachable, 4 because the houses are listed and she knows several owners. Total 16 out of 20.
She talks to twelve residents. Nine wash clothes weekly by hand or use a local laundry; seven pay between 400 and 800 rupees a month for washing and ironing; four say they would try a pick-up service if the price were fair and clothes were returned in two days.
Bottom-up estimate. She defines her first-year group as paying-guest houses within 3 kilometres of her home. She counts 40 houses with an average of 30 residents, which is 1,200 residents. From her conversations, 9 of 12 have the problem, 75 per cent, so about 900. Of the 12, 4 would try the service, 33 per cent, so about 300 might use it. Average spend, from what they pay now, is 600 rupees a month. The potential monthly market in her group is 300 times 600, which is 1,80,000 rupees.
Range: low case, 20 per cent might try, so 240 residents, and spend 500 rupees, which is 1,20,000 rupees. High case, 40 per cent, so 480 residents, at 700 rupees, which is 3,36,000 rupees.
First-year share she could serve alone: she can handle about 30 customers at first. Thirty times 600 is 18,000 rupees a month, which is 10 per cent of the mid-case market. Her costs for a small machine, a helper and a delivery bike would exceed that at first, so she notes that the idea does not work at that scale unless she partners with an existing laundry. She decides to test with a partner laundry, sharing the revenue.
She writes the assumptions and sources, and marks the ones she is least sure of: the share who would try, and the price. She notes that the estimate is her own and could be wrong by a large margin.
Meghna also reflects on the problem behind the problem. Three of the twelve residents said the real difficulty was not washing but drying clothes in a small room during the monsoon, and one said the difficulty was being at home when a delivery arrived. She adds those to her notes as possible alternative problems, and asks whether a smaller pain, like ironing, might be a more reachable starting point. Founders often find that the first problem they identified was really a symptom of a nearby one, and that listening to the exact words people use points to a better target.
She also asks a lawyer friend what she should know about handling other people's clothes, such as liability for damage, and writes the answer in her notes. She does not begin any service until she has a written policy on lost or damaged items.
She files the scores, the counts, the range and the assumptions with the date.
5. Common mistakes and how to fix them
Mistake one is choosing a product you like. Choose a problem that is frequent, painful, costly and reachable.
Mistake two is quoting a national market figure. Size the group you can reach in year one from the bottom up.
Mistake three is a single-point estimate. Give a low and high case and name the shakiest assumptions.
Mistake four is ignoring your capacity. Compare what you can serve with your costs and breakeven.
Key takeaways
6. Board summary
A good problem is frequent, painful, costly and reachable. Size the market from the bottom up for your first-year group. Give a range and name the shaky assumptions. Match ambition to capacity and breakeven. Most new ventures do not succeed, and sizing is not a forecast.
Check your understanding
7. Practice and self-check
Question 1. Scores 5, 3, 4 and 4 sum to what? Answer: 16. Question 2. Residents in 40 houses of 30? Answer: 1,200. Question 3. 75 per cent of 1,200? Answer: 900. Question 4. 33 per cent of 900, about? Answer: 300. Question 5. 300 at 600 rupees? Answer: 1,80,000 rupees a month. Question 6. Low case, 240 at 500? Answer: 1,20,000 rupees. Question 7. High case, 480 at 700? Answer: 3,36,000 rupees. Question 8. 30 customers at 600? Answer: 18,000 rupees a month. Question 9. That is what share of 1,80,000? Answer: 10 per cent. Question 10. What did she decide? Answer: to test with a partner laundry, sharing revenue.