How to Spot Business Trends Before They Happen — and Capitalize on Them

How to Spot Business Trends Before They Happen — and Capitalize on Them

The Hustle’s formula for identifying big business opportunities

Dave Schools

Jul 16, 2019

Sam Parr is the founder and CEO of The Hustle, a daily newsletter for entrepreneurs with over 1.5 million subscribers.

Parr and his team recently launched Trends, a paid newsletter and community featuring deep-dive industry reports with actionable insights, exclusive interviews with founders, and case studies with helpful analysis.

At a price tag of $299 annually, Trends shot out of the gate on launch day and logged thousands of sales in the first few days.

Sam put together a document with thoughts to help writers spot trends. The document, summarized below and shared with permission, outlines a process for spotting high-potential industry opportunities and how entrepreneurs and investors can capitalize on them before they make their way to the mainstream.

“One thing I’ve noticed when we’ve interviewed people is that most people aren’t great at sniffing out opportunity,” says Sam.

“So I’m trying to create a framework to help our writers spot Trends. Here are some initial thoughts.”

What is a business trend?

It’s a gap in the market, or an opportunity to create a company, which I define as a group of people working together to profitably get a product into a customer’s hands.

Put simply, spotting trends means sniffing out value:

Value = Product offering + eyeballs

So how do we use that definition to spot trends?

Get a product into a customer’s hands

Distribution and creating something people want… those are the two principal factors of products.

It’s not just about creating a product, but making sure you can get that product to the market.

Because of this, distribution must be baked into a product.

How do you profitably get your product into the customer’s hands? You do it with three components.

Sales team — Is there enough margin so you can hire a sales team to go to the market and create demand? Web traffic — Can you acquire search traffic from Google or social traffic from FB and Instagram for less than it costs to create your product? Profitable ad spend — Can you spend money on advertising or do grassroots marketing that gets eyeballs on your product?

Examples:

You own a car dealership in the middle of nowhere Nebraska. You sell world class and rare vehicles. The best of the best. But no one knows you’re there. Will this work? No. You have 20 million followers on Instagram. Most of them are young women in America. You decide to slap your branding onto 1,000,000 new lipsticks you had a manufacturer make. Will this business work? Most likely. You want to review power tools. The manufacturer told you they’ll give you $5 for every drill. You know that 100,000 people search for power tools on Google each month. You also know how to rank high on Google, but it may take a year or two. Can this business work? Maybe.

Now, we have to address how to create something people want

The other half of the battle. How do you know what people want? Well, sometimes you don’t. But sometimes you do. Until people are paying you money, there’s no perfect way to prove this. A screenshot of a discussion in the Trends Facebook group

But, there are ways to help increase the likelihood that you have a trend in front of you.

Past behavior: Do people already buy something similar to what you’re thinking about offering? Do they buy it already? Example: Women are buying lipstick. So we know that there’s demand there. Confirmed problem: Do you know that people have this problem and are actively trying to solve it? Are they searching for it on Google? Are they talking about it in forums? Are they using existing products to solve it? Does market behavior indicate high demand? How is consumer behavior changing? Example: Young people rarely buy cable.

If you can answer these questions, you’ll be able to create a product people want. But, remember, distribution is just as important. If you have both distribution and a product that supplies a market demand, then leverage this formula to scale the business:

Fine-tune this formula to grow the business

Value for the business = Frequency of purchase + purchase price + total # of sales.

For example, a cleaning service business can adjust any one of these three levers to increase the value of the business.

Frequency of purchase: how can your monthly customers become weekly customers? Or annual to quarterly? Purchase price: how can you increase the price from $100 to $200 per cleaning? Total number of sales: how can you grow your customer base?

If you’re able to positively affect the value of the business, chances are you’ll need help. Meaning, you’ll need more people to help you.

Final, an important note: can you get a group of people to help you build the company?

There are many businesses that make hundreds of thousands of dollars, even low millions, with one person. But it’s hard to find an example of a meaningfully sized company that’s a one-person operation. It’s possible, sure, but hard.

This all comes down to recruiting. This in itself isn’t the challenge. If you pay someone enough, you can at least get a body in the door. But, after having a strong market, a strong team is up there as an important part of an opportunity.