By Gary Dean, managing director of strategic consultancy, The Truffle Pig Consulting Co.

Building your business for longevity requires firm foundations. Nothing new in that statement, but what does it mean and how do we get there?

A few who know me also know that at some points in the past I have identified business situations which are not built on solid foundations, and then taken the harsh but only route to save a viable opportunity by going back to the crumbling foundations, fixing the base, and building something stronger and better that can stand being tested.

Part of building solid foundations is having the correct moral and ethical building blocks; the others of course are the foundations of experience and business environment.

We will not get too heavy; however, the key building block of the business environment certainly requires some understanding of micro-economics; that’s the economic behaviour of individual units, from your own household to your business. Regarding the micro-economics that are distinct in business we need the strategic tools of understanding market demand and industry supply.

Firstly, lets accept that strategy ultimately must involve final decisions based on the allocation of scarce resources. Even if you are Elon Musk there is never a bottomless pit of resources. In order to make the decisions that affect strategy in the right way it’s important to be as complete and accurate as possible in the qualification of the two key elements of market demand and industry supply.

There are lots of ways your organisation can spend a fortune on sophisticated surveys and statistical tools to try to uncover the numbers behind demand and supply – and there are lots of people that will willingly take that fortune from you – but here are some simple, straightforward and inexpensive ideas I gift you for free. Yes, I am generously beggared.

Sizing the market is important because without knowing the market size you won’t know your market share, both currently and potentially, nor be able to judge your competitive position within that market. Seems size does matter after all.

Here I list some ways to size the market. Remember this can and should be done by addressing two fundamental distinctions, the addressed market and the addressable market. The addressed market is the one you currently offer products to; the addressable market is made up of customers you could serve should you extend or change something in your offer or your strategy.

Six main ways of sizing the market yourself are, one, top-down market research – start with what is a known and make quality assumptions to drill down the numbers.

Secondly, you can do the reverse and conduct bottom-up research in the same way. Another way is by estimating how much each major customer spends in your target market and adding in the extra minor customers, known as bottom-up customer sizing.

Bottom-up competitor sizing through analysis of all the information you can find. Companies House reports are a good, if basic, place to begin is our fourth tool.

Market triangulation is based on benchmarking related markets to at least three of your known sizes to gauge a rough estimate of the size of the target market. Finally, mix-up all the results of as many of the previous five ways and subject the results to ‘sanity checks’ to decide which results are the most reliable and then create a weighted average set of results you are happy with and can work with.

It might sound complicated, but it just takes a bit of time. And it’s time well invested.

Demand is critical, isn’t it? Building the ‘best mousetrap’ was never a particularly smart idea for guaranteed success, what you offer needs to have a high enough demand to make your business viable.

Here is a little tool with an acronym that doesn’t work true, but is easy to remember – it is called the HOOF tool.

HOOF is a four-step approach to forecasting demand. Historic growth, Drivers of past growth, Drivers of future growth, Forecast of growth.

For the Historical growth data really try and get solid numbers from at least the last four or five years and be careful when using turnover information to factor out the growth that comes from increases in prices, inflation and GDP.

The Drivers of the past are a real mixed bag of data you need to think about. These include population increases, average income growth or falls, elements of macro-economics like political and monetary environment, fashions, price shifts, and even weather. Expected Drivers of the future growth are your best guess in terms of if and how past drivers will change and how that influences market demand. And finally, the enjoyable step, or not, depending on the outcome of your HOOF, what in your best judgment is the Forecast for growth?

Remembering the chant, I include in almost every article, ‘be honest’.

If the forecast for growth is very low or stagnant, and you’re not sitting on cash cow products, you need to change your focus fast.

If you are sitting on cash cow products but with little or no forecasted growth, get developing new products and new markets. If your forecast shows the market demand will grow and keep growing, get to work on your strategies to capture this growth for your business as a priority. And do it now before others do.