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  • Writer's pictureDarren Cody

Marketplace Traction Forecasting


First, What Is Traction Forecasting?


In other words, they are your projections for the first X years when starting or building your marketplace. However, from what we've seen, we had a problem with how they can be typically created. When starting a new marketplace, it is challenging to project accurate numbers based on TAM (Total Addressable Market) because saying, "If we get even 1% of this market, we'll be a unicorn in no time!" or saying we will achieve 20% MOM (Month Over Month) Growth in the first two years, is simply ambiguous. What are the drivers of that growth? New Product Releases, Marketing Initiatives, or a Referral Program?


Traction Forecasting allows you to account for monthly variable changes through multiple levers, the main driver being website traffic. Looking at three similar marketplaces on SEM Rush, an SEO / Marketing Tool, and viewing their website traffic history is more accurate (Not exact) and pulling an average for you to use as a guide for the monthly Traffic Growth. The remaining levers are pulled or twisted based on your company's actions. It will tie into your Product Strategy, Marketing Strategy, SEO Strategy, and Go-to-Market Strategy.


How Does The Free Template Work?

At first, we called it a 3D Business Plan because we saw that current or traditional Business Plans are very 1-Directional, up and to the right. In our experience, that hasn't been realistic, and the problems occur when your investors or board are holding you, the Founder, to these numbers and reach them... Avoid layoffs and have conservative yet excitable numbers. Marketplaces are a unique business model and take time to achieve PMF (Product Market Fit), a moment that's hard to describe. You know when you hit it.


As mentioned, the template works off your MOM Growth of Website Traffic. Let's break it down. (This assumes you have a landing page and social accounts firing pre-launch. Numbers are rounded.).


Launch - Month 1:

Users:

- MOM Growth: 0%

- Traffic: 1,000

- Bounce: 70%

- % to Signup: 10%

- # Potential to Convert:20

- % Signup Dropoff: 70%

- # Complete Signups: 6

- % to Demand: 40%

- % to Supply: 40%

- % to Stagnate: 20%

- % of Organic Attempts: 5%

- % of Churn: 5%

- % of Stagnate Convert to Adopt: 20%

- # of Referred Users (Dropoff Rate Included): 1

- # Total Members: 7


That is an example of one section of the template. We created it as a guide for you to use to help you think of other variables to incorporate that are specific to your marketplace. We've added Growth Strategies, Network Effects, Conversion Dropoff, Releases, and more!


Making Money

We've built 3 Revenue Streams into the model as well.


- Platform Fee (Rake)

- Activation Fee (Not Recurring)

- Insurance Fee


The names can change to your business model, but it allows you to create multiple versions of projections to see what makes the most sense and when you need or should charge less or more. Traditional Business Plans are always Best Case & Worse Case, but the model stays the same. The revenue mechanics don't change, and it's just how aggressive the numbers are.


You can now brainstorm different Rake Fees (We call it a Rake after the cut a casino takes from winnings. The House always wins.), other Activation methods, or additional services you can offer members at Checkout.


What if you and the team are brainstorming a way to get more members paying from the beginning? Perhaps you want to lower the Rake the first six months and increase it later once there is traction or let the first few months have a $0 Activation Fee. This template allows you to do that.


Things To Consider


Liquidity

For Demand:

High Liquidity: There are many options to choose from, and it is fast and easy to purchase.

Low Liquidity: Few options are available; you might have to wait for a suitable listing to become available.


For Supply:

High Liquidity: Quick and easy to sell their products or services.

Low Liquidity: Items or services sit listed for a long time without being purchased.


Supply Constraints

Types of Supply Constraints


Limited Number of Supply: Not enough providers to meet buyer demand.

Quality Control: Strict criteria for sellers or products can limit supply.

Geographical Limitations: Supply is concentrated in one area, limiting reach.


Impact on Marketplace

Reduced Transactions: Fewer choices can lead to fewer transactions.

Higher Prices: Limited supply can drive up prices, potentially reducing demand.

User Experience: Demand may leave if they can't find what they want.


These two critical metrics are not incorporated into the model because they are distinctive to each marketplace and the taxonomy of the offerings.


We would be happy to show you if you're interested in how to incorporate them into your template, conditional to our limited availability.


Please visit our website's Free Traction Template page to request your own copy.






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