If you watch Dragon’s Den, many of the companies pitching for money often come unstuck because the Dragons don’t believe they have any clue of their market size and likely success. They often ask the unlucky entrepreneur if they’ve plucked these figures from the sky.
It can be very difficult to have an exact figure for your potential market but you must at least make some effort to estimate it. Here are some ideas on how you might go about it without spending lots of money.
Create a Customer Profile
Research who you think will be buying your product, where they live and what their shopping habits are. This will help you clarify your plans. If your market is potentially worldwide but your budget isn’t, decide who you’re going to target first, second and so on.
Do your customers shop online? Are they in a certain age bracket? Are they a special interest group? Are they only in one town or area?
Look at some lists
There are dozens of companies selling contact data lists. Give them your customer profile or use their website and they will give you a count of how many people or businesses they have that match it. Try several different vendors and you will start to get a ball park figure for how many customers are out there.
You can also contact business link and trade associations who should have an idea of the market size for an industry.
How much do customers spend?
How much is each customer likely to spend with you? Do they buy once a week, a month or is it a one off purchase with no likely repeat. Once your business starts DON’T ignore your existing customers, they will provide the bulk of your future sales.
How much of the market do you need to win?
If you’re new to the market are you likely to win 1% or 10%? The competitors there won’t just lie down and let you take it. If you need a big % you will need a big marketing budget to make an impact. If the market’s huge and you need a tiny amount then you may well be OK.
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