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Determine Market Size constructively in these simple process
Whether you have started a business or you want to expand your existing one, you must determine Market Size plan investment & reach your profitable growth targets.
A businessperson started a business and within 2 years you have constructed a business. You may have a well-ranked website, your product is great, your team members are well trained, but you are not reaching the growth targets. Or simply you are far from what you expect.
This happens to many businesspersons because they cannot create an operable business plan, or take it seriously while approaching potential investors. Market sizing also aids makes a quick understanding of your potentiality for B2B opportunities and to find investors.
What is Market Size?
Your market size is made up of the total number of potential customers within a market. Or in other words, we can say the MS (Market Size) is the highest revenue you can generate by selling your products or services to potential customers.
Why Branding is important?
Answer: Branding is important because it increases reliability and helps grow revenue by making a memorable impression. It also builds reputation. Also, clarify why your service or products are one among the few.
How to simply calculate the market size?
- At first, determine your Total Addressable Market.
- Secondly, look at the penetration of your Total Addressable Market.
- Then multiply your target market by penetration.
- Determine Total Addressable Market:First, check which group of people is best suited for your products or services. In other words, your product or service is solving people’s problems or fulfilling the need of a group of people. Also, consider some niches, like price points and customer reaching areas or geographical areas.
After that, market segments the group of people for greater understanding. And this understanding will enable you to approach different groups differently.
Then, after determining the market segments you can choose the target market you want to focus on. Next, you have to expand the small target market. And to expand, you must contact business organizations, data providers, or regulatory agencies that handle business. Also, you can do your research.- Penetration of total addressable market:Penetration of customers is also included in determining size of market. See, if you are selling a particular type of bathing soap, hopefully, all kinds of people are included in the market segment, but then you have to determine how frequently or what percentage of total people like to purchase the soap. That frequency is called penetration. And you must estimate it to calculate MS.
- After determining the penetration, multiply it with the total addressable target market with penetration.
Example of Market Size calculation:
Let us assume you have started a shirt manufacturing business. Therefore, you must determine all clothing stores near you first.
After the research, you may estimate 20,000 clothe shops. And among them, you like to start a business with the first 1000 potential people. However, all 1000 people may not purchase a shirt from you. So, the shirt purchasers are 50% of what you have estimated.
Therefore, Market Size = Total Addressable Market x Penetration = (1000 clothe stores x 50%) = 500 clothe stores.
Next, to estimate Market value, let us say you are making Rs. 15,000 from each shop. So, by selling shirts you can make revenue of,
Market Value= Market Size x Average Value = 500 x Rs. 15,000 = Rs. 7,500,000
Bottom Line:
Every start-up business must estimate market size because it is the foundational part. It is crucial for your knowledge and for finding investors.
But remember to be realistic while estimating MS. Any investor likes to watch big numbers, but that does not mean fake. So, make sure you can clearly define all your estimations.
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