Accurately estimating the market size of your product or service is crucial to determine whether the business or specific industry is worth pursuing. And if you want financing, investors will want to know what the potential return of their investment could be. Fortunately, there is a wealth of information at your fingertips to help you determine the market size of your business.
I prefer take the wide view when quantifying markets. This can reveal unexpected relationships between types of people or businesses within a market and can also help identify the most suitable market niche to pursue once the business has achieved success in an ancillary niche.
With this in mind, I recommend sizing up three types of markets: the total available market, the served available market, and the target market.
Take the Wide View
Take the wide view by estimating the total available market size (anyone who could potentially use your product or service) first. After this, narrow your wide view of the market by determining the served available market size (the portion of the total available market your sales channel can reach, which often includes geographic limitations) and identify the further segmented target market size (the segmented piece or niche of the market to whom your company will be marketing your product or service first).
Quantify the Market with Numbers
To quantify these markets, you need numbers. If you’re pursuing an existing market, check out industry and market research reports (e.g. – Frost & Sullivan, Gartner, Forrester, etc.). These reports are often expensive, so you may need to look elsewhere. Sometimes you can find other articles referencing an industry report, so do a quick search of articles referencing the report and check the Google cached view to easily identify where the information you want is referenced (this can save a lot of time if its a big report).
Still no luck? Look in the researcher’s news archives, which often includes useful data in press releases about their reports. Research industry trade groups can also be very helpful, and often publish market statistics about the industry they cover.
If all this fails, visiting your competitors websites may provide you with the numbers you seek. Estimate the market size by looking at competitors’ annual report and dividing their sales revenue by their market share.
Bring It All Together
Remember, one report won’t tell you everything and there are many ways to get an approximate market size for your business. You may need to take a multiple data points from various sources and assemble it into a tailored market size report that quantifies the total market size, served available market size, and the target market size.
Researching data from various sources will help you see a more complete picture of your industry. With these numbers, you’ll better understand the potential for your business and which segments of the industry are most attractive.
Happy market sizing!
How have you determined the market size for your company? Share your experience.