Sean Everett shows how to use Bureau of Economic Analysis data to find the largest and fastest-growing markets. He walks through reading GDP tables, spotting sectors like healthcare and software with massive spending, and matching them to your expertise. The goal: pick a market big enough and growing fast enough to sustain a successful product.
Chapters
Hi friends, welcome back to Magical Products. Today we're going to be talking about market sizing, specifically magical markets. One of the things we need to do when we first start thinking about what product we want to build is actually something before that, which is what market we want to enter. So there's some shortcuts and some tricks that we can use in order to determine the best market that we should enter. I'm going to show you that trick today. And remember, as always, magical decisions. Are you moving closer or are you moving farther away? And then of course, a little bit about us. And then I've also included a blank page here at the end of the PDF, which I'll include in the notes, where you can scribble your own thoughts either digitally, on paper. It's just a blank place for you to put down some of your thoughts and ideas. Okay, great. So let's take a look here. So what I've done, I'm going to show you the shortcut. So basically just go to Google, type in US GDP. You'll see that GDP last year was $21 trillion. That's in the United States. The worldwide domestic product is something around about $100 trillion. And if you're not familiar with what GDP is, It's basically the value of everything that someone purchases. So that would be goods and services, so physical products plus services like cleaning a house. Okay, so type into Google US GDP, scroll down a little bit, and then you'll see this bea.gov. It's really important that we get our information from reliable sources. This is part of the federal government. It's a service that they provide. And so if you click on that link, I already have it open, just doing this to make things easier. So basically you can come here. This is the page from the US Department of Commerce, and what you see here is gross domestic product. So what the BEA does, Bureau of Economic Activity, is every quarter they publish new data. So what I'm going to show you today, just scroll down a little bit and go here to the full release and tables. And you can come back here anytime. There's a lot of stuff that you can explore. It's very interesting, um, if you're into this sort of thing. Of course, I recommend you spend some time with it. This will really help you identify a market, and markets beat products and great operators 10 days out of the week. Okay, so here's their latest release. This came out December 22nd, 2021, so obviously I'm recording this a little bit after that, but This is the most up-to-date data in the world on the United States and what everybody spent. Okay, so this is a long— this is maybe 20, 30 pages, and it's relatively long. I'm just going to highlight a couple pages here, so forgive the scroll as I go through. I've also included a PDF in the show notes that highlights some very specific items. And we'll go through that in a second. But here we are. So first thing I want to show you is the change in GDP. So what happened to our country? And I say our because I'm located in the United States. Other countries around the world may or may not publish something like this, but I'm just using the United States because I live here. Pick your market, pick your country, maybe the territory where you live or where you want to live. and do the same, same thing, same concept. So basically I want to show from basically how did this increase or decrease from last quarter. What we see here is like here's the highest sector up top here that increased, and here's the ones that decreased the most. On a percentage basis, not that much, but when you're talking about trillions or tens of trillions of dollars, these small percentages add up to a lot of money. So basically a lot more money was spent In Q3 of 2021 on professional, scientific, and technical services. Also finance and insurance. Interesting, right? Where did money not be spent? Retail. People weren't buying clothes. People also weren't buying construction. This might have been due to higher prices related to the pandemic. So interesting points there for you to consider. Let's keep going. I want to highlight a couple other things for us. This just gives you a list of charts. So we're going to skip past a couple of these. These are just percentage changes, and I'm going to show you the chart that we actually want. So this one on page 12 here— I've also included the page references in the show notes. So be careful you're looking at the right column. So this is billions of dollars, and then this is, um, something we're not going to get into. But basically, look at the year. Here was all of 2020. Here are the last 2 quarters of 2020, and here's the quarters in 2021. So Q3, this is the most up-to-date data right here. So this is the total gross domestic product, basically all the money spent on goods and services in the United States, um, in the 3rd quarter of 2021. All right, so $23 trillion, and this chart shows you how this is broken down. And this is goods, like I said, so these are physical objects, and these are the services. Right? So like cleaning, healthcare, transportation. Excuse me. So what you can do as you go down here is you can see where the money is spent. Obviously good markets are markets where people are spending a lot of money. So you could, you know, export this to Excel, sort descending by dollar value, or just pick a couple things out that seem interesting to you. I'll highlight a couple things. So in goods, motor vehicles and parts, $0.7 trillion or $667 billion. Billion. Household furnishings, recreational goods. Let's go down to clothing and footwear. So a lot of, I think, first-time founders and a lot of people on the internet, a lot of people on Shopify, they go straight to clothes. It's easy to think about. You can do screen printing, you can do dropshipping. $480 billion on that. But look at gasoline, almost the same amount. Now let's go to services. Household services utilities, $2.5 trillion. Healthcare. Wow. Okay. So almost 5 times the amount we spent on clothes and shoes was spent on taking care of our health. That's a good market. As our population grows older, which is going to happen over the coming decades, this number I expect to go up quite considerably. Obviously food, people got to eat, a trillion dollars by itself. Financial services, things to deal with money, more than food. Money, people spend more money on money than money on food. Isn't that surprising? Other services, that's a big one. We should look into that one. Okay, let's keep going. So what about like fixed investments? So these would be assets, right? So Things that may appreciate in value or could produce cash flow streams for you. Industrial stuff, you need a lot of money, some sophistication to work in that market. But I wanna point out something interesting, which I've seen grow over the years. And as we move into more of a technology and internet-first society, I will see, I assume that this intellectual property line item will grow. $1.2 trillion, more than food. More than financial services. How does that break down? Software, apps, the things that are on your phone, the thing that you're interacting with right now. R&D, research and development. Entertainment, influencers, movies, musicians, only $95 billion, a very small sector. So if you look at this $1.2 trillion, this is the world that I have expertise in, at least I think I do. And have operated in for the last 20 years. So I think that's a good one. It's a good bet to place over the coming decades if you're looking to break into an industry. Rising tides lifts all boats, right? Okay, let's look at some other stuff. So you can look at some federal spending. I want to keep going though and go down into A chart of accounts. That's a change. We're going to keep going here. 18. So this is interesting. Let's look at personal income. This tells you how much people got paid, right? Compensation of employees, $20.7 trillion. $10 trillion of that was spent on wages and salaries. This is the amount that people get paid in the United States In these 3 months, $10 trillion. Here's business owner income, $1.8 trillion. Now there's about 150 million people that make up this bucket, and there's a lot less, maybe like 35 million that make up this bucket. So while this number appears larger, it's spread over many, many more people, right? So Let's do a quick calculation. Let's do 10,459 divided by, let's say, 145 million people. Oops, we gotta do 1, 2, 3. That's 10 million million. So basically, on average, $72,000 per person, the average income by people. Now I'll include some data in the show notes on where you can get the data for the number of people here. Rental income, also interesting. So people that maybe buy a second house or do Airbnbs, quite a significant factor there. Okay, personal income on receipts and assets. So this would be a return on an asset, so like an investment in property, plant, equipment, Not including rental income. So as you start to earn an income, that's one half of the problem. The other half is you might have a little bit of a disposable income, and I'm going to show you how much of that happens in the future. Give me just a couple minutes. What do you do with all that money? So it's— you create a cash generation engine. The second half of that is— Okay, now how do I do capital allocation? Where do I put my money so my money works for me? You put both of those things together and you have an income generation engine that can continue to work for you while you take, you know, time off, go on a trip, or maybe you just want to mow the lawn. I don't know. Okay, so I'm going to go to this next piece here. So corporate profits, there's a lot of really interesting information here. Okay, so Corporate profits. What was all the money spent by corporations in Q3 2021? You can see how this is broken down. $45 billion. This goes down into like federal, non-federal. You can see all the, all the items that they spent money on. Cool, let's keep going. You can see a little bit more information on utilities and transactions. Here's the private industries. You can see biotech, sector, what was the growth rates or what was the contribution to percentage change. So let's look for a big number down here. 1.54. Interesting. What is that? Professional and business services. Okay, easy to get started, very, very high margins. What you really need is to develop expertise and be the best in the world at something. Go super, super duper niche where you're the only person in the world and And develop a lot of expertise. Mine specifically is product, and so that's why we're here today talking about it. But you can start to hone in on things that interest you and see like, okay, maybe where do I have interest? Where do I have a skill set? Where can I see myself working in for the next, let's say, 10, 20 years, um, that I'm gonna have some fun in? Okay, great. So let's pause here and then I'm gonna show you some more data.
