INDUSTRY INSIGHTS
The Fallacy of '1% of the Market': Why You Need to Build a Real Business

In our most recent episode of Bricks, Bucks & Bytes, Patric offered a groundbreaking, blunt but powerful piece of advice:

This colorful statement was prompted by our discussion on a trap many entrepreneurs fall into when pitching their startups - the "1% of the market" argument.

The Problem with the 1% Argument

Spencer Greene, who inspired this discussion, points out that saying "if we only get 1% of a $20 billion market, that's $200 million" adds no new information to your pitch. 

It's a lazy way of estimating market size and potential, and it detracts from your case rather than strengthening it.

Patric (as we expected) took this criticism a step further, arguing that this approach often stems from founders making "very lazy assessments" of their market size. He emphasises that an entrepreneur's job isn't to tell a narrative, but to build a [F***KING] business.

Watch:

What Building a Real Business Means

Building a real business boils down to three key elements:

1. Selling a product

2. Through a specific channel

3. To a specific customer

This framework forces entrepreneurs to be much more precise about their market, their offering, and their go-to-market strategy. It's about finding a niche where you can truly excel, rather than trying to grab a tiny slice of an enormous pie.

The Power of Niche Focus

Patric is an advocate for a strategy of intense focus on a specific niche. He explained that in many sectors, particularly in construction and AECS (Architecture, Engineering, Construction, and Supply Chain), there are numerous "highly nuanced but still highly repeatable niches" that reward specificity.

By focusing on a narrow niche, entrepreneurs can:

1. Define a differentiated product

2. Identify a specific, repeatable customer

3. Develop an effective channel to reach that customer

Contrary to what some inexperienced investors might advise, Patric insists that this approach doesn't limit your potential market. Instead, it allows you to:

• Master your niche

• Potentially capture a large share (even over 50%) of that specific market

• Use that success as a launching pad to expand into adjacent niches

A Real-World Example

To illustrate this point, we shared an example from outside the AECS sector. 

There is/was a software company in the freelancer space that initially had broad categories on their website, including one for "linguists." When they dug deeper, they discovered a highly specific niche: speech therapists.

By creating tailored landing pages and software features for this niche of 70,000 professionals, they achieved incredible conversion rates and captured 70% of that market. They then replicated this strategy across other niche categories.

The Takeaway for Founders

The key lesson here is to resist the temptation to pitch your startup based on capturing a tiny percentage of a massive market. Instead:

1. Identify a specific, narrow niche where you can excel

2. Develop a product that addresses the unique needs of that niche

3. Create a targeted channel to reach those specific customers

4. Aim to dominate that niche (50%+ market share is achievable in many AECS niches)

5. Use that success to expand into adjacent niches over time

Remember, as Patric puts it,

By following this approach, you're not just telling a story or making vague projections. You're building a real, sustainable business with a clear path to growth and profitability. And that's what will truly impress investors and set you up for long-term success.

Interested in learning more? Check out the full episode with Patric👇👇👇

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