In this article, we have mentioned top reasons why it’s necessary to calculate your market size potential for business growth and success.
A value comes from knowing your market size as a business. It can not only help with your marketing strategy, but it’s also critical when starting up a new venture. Taking time to assess and calculate your market size potential can help maximize the success you achieve for the business over the year and beyond.
However, calculating market size can be a challenge and not every business does it efficiently enough. In this article, you’ll understand the benefit of calculating market size and how to calculate market size in relation to your market in particular.
What does market size mean?
Market size refers to the total number of sales or customers your business can see. This is typically measured over a year to better understand the potential available. Whether you’re looking to launch a new product line or start a business from scratch, spending time on the market size is essential.
There’s also a similar method of practice called market share, which looks at the total part of your business's market in sales or customers. The global revenue for market research exceeded 73.4 billion US dollars in 2019. Market analysis and spending time assessing your market are critical to your business’ success.
Why is it important to calculate market size potential?
Market size is a necessary part of strategic planning for your business. Knowing how to calculate market size is useful, and there are many reasons why it’s important to calculate your market size potential.
1) Helps achieve investment
Investment is always a good thing to have for your business. Who doesn’t want more financial support for their company? Whether getting funding for the development of a new product or backing your new business venture, calculating market size can help convince those stakeholders or investors that your idea is one to put their trust and finances in.
Securing new investments can make getting projects up and running a lot easier. Why not make it easier on yourself by putting in a bit of time and effort through researching the market size?
2) Creates a strong marketing and business strategy
With 67% of strategies fail because of poor execution. It might be down to a lack of understanding of your employees or the failure of the organization as a whole to implement the strategy created.
Developing a strong marketing and business strategy requires data, and data comes from researching your market with a fine-tooth comb. Do you know who your market is and how big it is? How much money does your business require to create a strong strategy?
Having the answers to these questions can help build the strategy correctly and set clear goals for the business and future.
3) Clarity on budget and hiring costs
When scaling your business, understanding your company’s potential trajectory for growth can ensure you have the funds available for the projects you have ahead of time.
It’s always good to have clarity on your finances so that you can budget accurately and that you’re not left out of pocket. It’s also important to reduce the risk of losing revenue for the business, especially regarding hiring costs.
Hiring is not a cheap part of running a business, so you may want to assess what hires are possible and what you may need to outsource temporarily.
Your budget for market research can help you better understand your customers, who they are, what they require from your business, and how to deliver on those requirements.
4) Discover your product’s potential on the market
A product or service idea can sound good when brainstorming, but without any calculations or market analysis, there’s a risk that the market doesn’t exist or it isn’t financially feasible to go ahead as planned.
It can be hard to let go of any product ideas you’ve set your mind to. However, by calculating the market size, you can’t deny the numbers in front of you. Calculating market size can help remove the feelings you often get when creating a business or developing a new product or service idea.
Knowing your product’s potential on the market will also prevent you from making any financial mistakes, which can be detrimental to a business, especially a new one.
5) Determines company market potential
Data on your market size potential can also help determine what is possible for your company’s chances on the market too. The chances of being completely unique for most products or service ideas are slim. With that said, it can be valuable knowledge to understand the odds your company faces when competing with other companies within the industry.
6) Helps to position yourself for marketing opportunities
The market you’re in is likely to be busy, so it’s crucial to know where you need to position yourself for marketing opportunities. Haphazardly aiming for any trends in your domain will not be productive or financially savvy.
It can help to know this information to invest correctly in the right opportunities that come your way as a business.
7) Keeps you and your team impartial in decision-making
There’s a certain expectation that your target audience will lap up your product, or your new business will rock the market, changing it forever. Imagine the disappointment when nothing happens, and you realize your creation was a big mistake.
Market research and calculating market size potential can help encourage you and your team to be more impartial in decision-making. It helps you understand the difference between the expectations and what is available on the market.
8) Better accuracy on pricing, marketing and suppliers/distribution
Having more accuracy in pricing, marketing and supplier/distribution is critical. Knowing your market size, it can help you figure out what pricing is going to be more appealing to your customers. If you have a bias regarding your product or business, you’re more likely to make inaccurate pricing decisions. The same goes for your marketing strategy and how you go about your supplier and distribution chain.
Accuracy is important when putting a new product or business on the market. Not hitting the right mark will likely impact your success negatively.
9) Understand your target audience better
Having a better understanding of your target audience is essential. You may be selling yourself short without knowledge of your target demographic and their preferences. Valuable insights can be found by looking at your target demographic, yet not all businesses are willing to focus on this enough.
The smallest of data can help influence your development as a business or when it comes to product creation.
Tips to conduct market analysis
Market analysis and calculating your market size potential is easier when you know what you’re looking for and what approach to take for an accurate result.
Review your competitors’ sales
The data you need is often available to you without really having to do much yourself as a business. Review your competitors’ sales by tracking the keywords they’re using, researching what content is being shared the most and monitoring their social media activity.
A lot of this you can do without the use of any online tools, but you could look at a platform like Buffer that offers an analyzing tool for both your own platforms but also that of your competitors.
Consider government statistics
It’s important to remember that the accuracy of results provided by government statistics relies heavily on the participants involved. You might not be able to get an accurate picture of the market size potential when using government stats, but exploring this data can still be useful to help in your calculations.
If you will use government statistics, ensure that you’re still doing your own research to back this data.
Approach a data collection agency or firm
It’s worthwhile approaching a data collection agency or firm that might help collate the market size and data you need. These specialized research firms can help achieve more accuracy on just how big or small your market size is.
The importance of calculating market size potential
When faced with a competitive market, you must do research and analysis when it comes to the market size. You don’t want your organization to waste time or money unnecessarily, so calculating the market size potential for your new business venue or product line can be critical.
Sawaram Suthar is the founder of TheNextScoop and Jagat Media. A digital marketing consultant, he has experience in branding, promotions, page optimization, research, and strategy. He has an MBA from the University of Pune. Anyone can find him on Twitter @sawarams.