Three Criteria for Picking a Market
Pain, a growing market, and spending power — pick all three.
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 3
- Confidence
- 88%
Alex Hormozi's filter for market selection has three parts: the audience must be in pain (and the bigger the problem, the more you can charge), the market should be growing rather than shrinking so you have a tailwind, and the audience must have spending power. All three matter simultaneously — a painful problem in a growing market is worthless if the people can't pay. The key insight is that a tiny change in which audience you target can massively change how much you can charge, because you price against the value of the customer's business, not your own effort.
Origin
Alex Hormozi, founder of acquisition.com, laid out these criteria for Hala, illustrating them with a friend who tried to build a resume-coaching business for unemployed people — a painful problem with no spending power — versus the far more lucrative move of helping corporate executives get raises.
Core principles
- 01The market must be in real pain — bigger problems solved mean more money made
- 02The market should be growing, not shrinking, so you have a tailwind
- 03The market must have spending power to actually pay for the solution
- 04You get to charge based on the value of the customer's business, not your own effort
- 05Tiny differences in which audience you serve create huge differences in revenue
How to run it
- 1
Confirm the pain
Make sure people actually want what you have because they are suffering a problem they want to solve. The bigger the problem, the more you can charge.
- 2
Choose a growing market
Pick a marketplace that is growing rather than shrinking so you have a tailwind pushing behind the same amount of work.
- 3
Verify spending power
Ensure the audience has money to spend. A growing market with a painful problem you can solve is worthless if the audience is broke.
Pro tip Serve the version of the audience with the most money — you get to charge based on the value of their business, not yours.
Watch out The worst outcome is a solvable, painful problem in a growing market where the audience has no money.
In the wild
A friend of Hormozi's was excited to coach people on their resumes, convinced he'd make a lot of money. But his market was unemployed people on unemployment — broke. Had he instead helped corporate executives get raises, he'd have earned far more from a nearly identical service.
→ Same skill, wrong market — little money. A tiny shift in audience would have unlocked much higher revenue.
Hormozi noted many Fortune 500 vendors like Salesforce built their value on serving very expensive customers — million-to-ten-million-dollar annual contracts — before going down-market.
→ You get to charge based on the value of the customer's business, not your own cost.
Common mistakes
Ignoring spending power
Picking a market purely on how painful or noble the problem is, without checking whether the audience can pay, produces a business that helps people but never earns. Spending power is a non-negotiable third leg.
Is it for you?
Best for
Anyone choosing a niche, audience, or offer and deciding who to serve.
Not ideal for
Mission-driven work where serving a low-spending-power group is the explicit goal regardless of revenue.
From the transcript
“The bigger the problem that you solve, the more money you make for it.”
“The lever on how much money you can make serving different audiences is the name of the game.”
“You get to charge based on the value of their business, not yours.”
From the episode
The Creator’s Playbook: How Top Entrepreneurs Monetize Their Expertise to Make Millions Online