Once you have decided that there are enough people to support your business, you must then look at what competition already exists that might dilute your market.
Let’s use a golf instructor as an example. What if you’re planning to start a golf instruction business and there are already other golf instructors in your area? If so, you must share the pool of potential students with your competitors. If there are three competing instructors in your area, you have a problem. Unless your competitors are totally inept, your business, fourth in line for the pool of golfers, will have a tough time breaking even.
You may think there’s still room for you to prosper, and for all four instructors to average enough students to make a good living. However, this is very unlikely. There’s one elusive element that upsets the entire equation: the establishment factor. Your top two competitors may have been in business for more than five years, and may have established deep roots in the community.