In a previous tutorial (How to Size a Market - Part 1), we showed you two methods for sizing a market. Here, we continue with two other methods that can be used to size a market for Business-to-Business (B-to-B) and Business to Consumer (B-to-C) companies.
This method is most suitable to B-to-B companies. You will see this method used in many business plans presented to venture capitalists.
Here's a step-by-step approach to the Market Buildup method. Notice how we first break down a market into smaller units, estimate the size of the smaller units, and build the estimates up into a larger estimate. That's the idea behind this method.
First you want to take the market, broadly construed, and break the market up into reasonably defined and identifiable categories.
For example, if you were trying to size the B-to-B market for general business services, you might use the government statistics known as the SIC (Standard Industrial Classification, now known as the North American Industrial Classification System) that you can find in any library or on their website. You could use categories such as manufacturing, construction, retail, etc, or the sub-classifications (e.g., construction is sub-classified into heavy construction, special trade contractors, etc.).
If you were trying to size the market for Internet measurement services, for example, you might use such categories as E-commerce and content providers, Enterprises, ISPs (Internet Service Providers), etc.
Allen Weiss founded MarketingProfs in 2000 and continues to provide strategic direction for the company as CEO. He's currently a professor of marketing at the University of Southern California and teaches mindfulness in companies at InsightLA.