What are the steps to determine your business's market size and potential?

1 Define your market

The first step is to define your market in terms of the geographic area, the customer segments, and the product categories you want to serve. For example, if you are selling organic coffee, you might define your market as the US, the urban and health-conscious consumers, and the specialty coffee industry. This will help you narrow down your focus and scope your research.

2 Estimate your market size

The next step is to estimate your market size, which is the total number of potential customers or sales in your defined market. You can use different methods to calculate your market size, such as top-down, bottom-up, or value-based approaches. For example, using the top-down method, you might estimate your market size by multiplying the total population in the US by the percentage of coffee drinkers, by the percentage of organic consumers, and by the average annual spending on coffee.

3 Evaluate your market share

The third step is to evaluate your market share, which is the percentage of the market size that you can capture with your products or services. You can use different factors to estimate your market share, such as your pricing, quality, differentiation, distribution, and promotion strategies. For example, you might estimate your market share by comparing your price and quality with your competitors, by analyzing your unique value proposition, and by projecting your sales based on your marketing plan.

4 Analyze your market trends

The fourth step is to analyze your market trends, which are the changes and patterns in your market over time. You can use different sources to research your market trends, such as industry reports, customer surveys, online reviews, and social media. For example, you might analyze your market trends by looking at the growth rate, the consumer preferences, the technological innovations, and the regulatory changes in your market.

5 Identify your market opportunities

The fifth step is to identify your market opportunities, which are the gaps or needs in your market that you can fill with your products or services. You can use different tools to identify your market opportunities, such as SWOT analysis, Porter's five forces analysis, or PESTEL analysis. For example, you might identify your market opportunities by evaluating your strengths, weaknesses, opportunities, and threats, by examining the competitive forces in your market, or by assessing the political, economic, social, technological, environmental, and legal factors affecting your market.

6 Validate your market potential

The final step is to validate your market potential, which is the feasibility and profitability of your products or services in your market. You can use different methods to validate your market potential, such as testing, prototyping, or piloting your products or services, soliciting feedback from your potential customers, or conducting a break-even analysis. For example, you might validate your market potential by launching a minimum viable product (MVP), by surveying your target customers, or by calculating your fixed and variable costs, your revenue, and your profit margin.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?