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How to Determine Market Size

Business ideas are only viable when there is a market size big enough to generate adequate revenue. So if you have a business idea or are looking to add a new product or service to your already existing business, it’s essential you invest the time to determine your market size.

What is market size?

According to “Market size refers to the total number of potential buyers for a product or service and the potential revenue reach based on that population size. Market sizing is the process of calculating these numbers to accurately measure your business’ growth potential.”

Why measure market size?

Knowing your market size allows you to determine if your concept is a worthy investment, estimate potential profit and gain clarity on who your customer base truly is. 

Market sizing also helps you create a marketing strategy that has the potential to turn prospective customers into loyal consumers by answering valuable questions:

  • Who are your customers?
  • What problems do your customers have – and who is currently addressing them?
  • What is the business case for your product offering?

How to calculate your market size

Once you’ve defined your target market through tools like customer surveys and competitor research, it’s time to calculate market size. There are 2 methods to calculate your market size, Top Down and Bottom Up. Both take into consideration your target market and penetration rate.

Top Down Approach

This method involves you looking at the total market and narrowing it down to your target market.

Bottom-Up Approach

This method is the opposite of top down. You instead start small, looking at the number of units you can expect to sell, and work outwards by then considering how many sales you can expect from each buyer. 

Examples and more Tips

Head over to the article “The 2 Simple & Straightforward Methods for Market Sizing your Business, “ for examples of both methods.

Check out the article “How to calculate your market size” by to learn even more about calculating your market size.

Now What?

Once you determine your market size you can now consider the following:

  • Is there enough potential revenue to be earned?
  • Does your market size appeal to investors?
  • Is the market growing or shrinking?
  • What’s the competition?

Market size gives you the insight to know if your concept is investable and whether your potential revenue outweighs costs.  

Also since determining market size doesn’t take into account competition, customer churn rate and various other factors you need to spend time calculating those factors as well.

All in all, market size is going to be a critical number to understand as you move forward with your business idea or next product/service. You’ll never be able to capture the whole market, so you need to know if you have the chance to earn enough customers to make your venture successful and worthwhile.

Tools & Support

While the concept of market size is fairly simple and straightforward, executing the research might feel overwhelming and daunting.  I highly recommend you head over to to download their free Market Research Kit and Survey Monkey to check out their market sizing survey templates as well. These tools walk you through different processes to conduct market research and ultimately determine your market size.

If you need assistance figuring this all out don’t hesitate to book a business coaching session with one of our coaches.

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