How To Research Market Size To Predict Company Growth
The business world constantly discusses market size, but what does a company accomplish by researching this metric? There are tons of reasons why you should research your market size from deciding on whether or not to invest in a new idea to predicting the growth of your business.
Let’s say that you manage to determine the size of your market quite accurately. This can give you a big advantage and keep your business one step ahead of the competition. With such data in your hands, you can secure better investments, be certain of your goals, and create better-planned strategies.
Below we’ll help you uncover the basics of the market size metric, as well as tell you how it can be used to guide and predict your company’s growth.
What is ‘market size’?
Market size is a metric used to determine the approximate number of people that will potentially buy your product or pay for your service. More specifically, it’s the number of sales or customers in a specified period that your business can expect. Alternatively, it can measure the total potential revenues for a specified period. In most cases, this period is a year.
There are plenty of ways to approach this metric and different things to measure. For example, if you are looking to create a distribution plan, you also want to measure the number of potential sellers in addition to that of buyers. This all falls under the market size umbrella.
Why is market size important for businesses?
This small bit of data can help you a lot. For starters, it will show you how viable a niche market is and how smart it is for you to invest in an idea. One of the key tasks in evaluating your target market is to determine its size. If it is too small, you won’t have enough customers and sales to cover the costs. If it is too big, you’ll need a truly unique idea and a competitive edge to succeed and stand out in the crowd.
That’s just the starting point, though. Some other reasons why you should research market size are:
- Means of gaining investments. Investors will be more likely to invest in a business that has a solid chance of making money. By presenting them with data that shows them how great the potential for your idea is, you can gain more investments.
- Develop a smart business and marketing strategy. If you aim for growth, which you probably do, you should pace your strategy based on realistic data. This is what market size offers you – knowing how much money you can make and how many customers you can attract to your business.
- Determine your hiring, budget, and other important elements. When working on your business plan, you need to know how much you should invest, how big of a return you can expect, when you can invest more, etc. This type of data will help you with that.
How to determine market size and predict company growth
If you want to determine how big your market really is, the first and most important thing to do is find the right tool to measure this metric. With the right tool at your disposal, not only will you learn how to determine market size, but you can also turn the data into means for growth and better success.
When it comes to researching the size of your market, Attest is the best tool you can find. This tool will help you calculate the market size potential and make smart investments for your business ideas. You’ll also learn about the pain points of the market, and the interests of your target buyers, as well as get amazing insights regarding price sensitivity.
This tool has plenty of customisable market insight surveys that are automatically sent to a built-in audience of over 110 million people. It gives you tremendous access to data that can help you build, advance, and grow your company.
Now that you know what to use to determine market size, let’s move on to how this can help you.
Starting from scratch with market size data
You can collect market size data from many sources. We aren’t just talking about the general desk research that we all do when we decide to start a business. Don’t just look at government-published statistics or do a simple Google search to find some percentages.
If you want to start from scratch and make your idea a smart investment, you need to dig deeper. Thanks to tools like Attest, you can obtain data from millions of people across different countries. This will give you more detailed information, which is what you need to make the right decisions. Essentially, you should research market size to find the answers to the following questions:
- How many people need your product?
- How important is your product to them?
- What are the pain points of your buyers?
- What other products are they using for the same need?
- Would people be interested in what you offer and how likely is it that they’d buy it?
- How much money are they currently spending on such products?
- How much money would your potential buyers spend on your product?
When you collect market size data, you can learn who your audience is, what their budget is, what they need and how they respond to different audiences. All of this will help you prioritise your marketing effort and discover the potential of the market your company is in.
Using market size data to define your buyer persona
Regardless of the stage your business is in, you must continuously define your buyer persona. These are the people that are most likely to buy your product and they make up your market size. Determining who the buyer persona is makes the first step of calculating your market size. How else would you know how many customers you have if you don’t know who they are?
Once you define your buyer persona or target customer, you can finally estimate their total number. How can you do this?
For starters, you can check how many customers your biggest competition has i.e. companies that have similar products and company goals as yours. You can study publicly available sources, reach out to the target audience, and do your own research on forums, social media channels, etc. You can also check the number of visitors to a website to get an idea of how many people frequent your competition’s business online.
Figuring out the serviceable obtainable market
Total market size is just a number at this point. If you want to turn this into a way to predict company growth, you need to find the serviceable obtainable market.
Let’s be realistic – you won’t be able to reach every single potential customer from that market size number. There’s no way to do this. No matter how much you invest in marketing tools, business plans, and strategies, you won’t be able to amaze and convert every buyer persona in your market. You need to count in the competition and be more realistic, which is where this important step comes into the picture.
At this point, it is important to combine your market size metric with the SOM metric. This refers to the potential customers and revenue that you can create realistically for your company based on your budget, number of employees, strategies, etc.
There are several ways to calculate the SOM by using your market size data. Let’s take a look at the top three ways to do this:
- Top-down. This is based on assumptions, predictions, and forecasts made about your market. It’s based on estimates and conjectures that are sourced from various metrics and statistics. It’s often a vague approach, but if you base it on enough data, it can be quite helpful when you’re trying to understand what part of the market you can corner.
- Bottom-up. The second option is to start with the units you can make, the price you plan to charge, and how much you are expecting to sell realistically. Your SOM equals the number of customers you can reach and the amount you can get from each of your sales. This is still a very broad assessment, but it’s more detailed compared to the first method.
- Value theory. Finally, this strategy is very useful even though it is not as precise as the others. In this case, you’ll consider the value that your product adds compared to other similar products on the market, as well as the amount that customers would pay if you add the value to your offering.
Naturally, you can combine several methods to get more specific data and predict the growth of your company. The deeper you delve into this, the clearer the picture of your SOM will become. Eventually, you can use this data to impress your investors and stakeholders and inform your future decisions concerning your company.
There’s no science to estimating your market value or size, but this metric can be very useful in making your company more effective and successful. With the right tool and careful consideration of the data you find, you can use market size to make smart decisions and predict growth over time.
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