Know-How Exchange : Strategy

Simply put, define WHO will buy your product or service and then count those people. The more specific you are, the better. For instance, if you define your customer as "anyone can buy it," then there are 6 billion anyones in the world. However if you define your customer as athe owner of a printing shop with offset printing capability in South Africa is ideal, then this is better.

To estimate of the number of businesses there are, you can find industry trade organizations and journals that provide this information. Or if you are looking in a given town or city, you can use phone books. Google can be a good source - search "number of XXXXX in YYYYY" where XXXXX is the kind of business and YYYYY" is the geographic area.

To understand how many are purchase per year of your product or service, you will need to talk with a few prospective customers. You may find it depends on the size of their market and then you will have to estimate their market size. Eventually, it may get down to being based on population of a given demographic - men between the ages of 30 and 60 because of the end consumer in the total purchasing chain. For example, if you supply grease for manufacturing ball bearings that are used in the wheels of skate boards, then you have 4 wheels with 10 bearings per wheel on a skate board and it takes 1 gram of grease per bearing, then your estimate is 40 grams per skate board. You can then survey people and find out that 0.0025% of all people buy a skate board per year. The planet has 6 billion people so your total market is 6000 kilograms of grease per year. Of course, you will not have the sales channel to reach the entire global market. So more relevant to you is how many are in a reasonable geographic area where you can sell. This takes a thought process to imagine the sales process from calling on the customer the first time to closing the sale. Then you estimate the how many sales one salesman can make per year, given driving time and success rate and come up with a selling limited market estimate.

This may be confusing to you, but without specifics of what you are selling to whoml the best I can do is provide you with a survey of techniques. I hope this helps.

Wayde

There are many sources to find how "big" the market is. But that number may be worthless. A typical mistake people make is seeing that # and say, geez, if I only get 1% of that market, I'll be rich. And they end up broke.

So as Wayde says- it doesn't matter that a gazillion people buy that type of product -- what matters is how are you going to get them to buy from you.

As far as that number, you can probably just google it. That's where I start when I write biz and marketing plans. And while you're at it, research why they choose the suppliers they do.

Adding to what has been said - market size is also very much effected by how you define the market. using a somewhat car related example - the market size for a car dealer could be all people within a certain distance of the store that will buy a car in a set amount of time. Or it could be all people within that range who buy high end sports cars. The number of vehicles that can be sold is very different if you are Honda with a full line of vehicles, versus if you are Ferrari with just a few very high end cars that only a very small portion of the population can afford.

You need to define the market by what is important to you. And as said above, define it more tightly than you think you should. Quite possible that many people may want to buy your product or service, but you should focus your resources on the segment of the market that is easiest to break into, so define your market as that easy segment.

It is a common issue with start ups is that they try to sell to everyone at first, but in the end have so little focus they get few sales. Instead they should focus on one area, creating the messaging of how the product meets that segment's needs, getting the message to people in that segment multiple times, etc. - which will actually get you more sales than the scatter-shot approach.

You're getting great advice from Wayde, Carol and Peter. What would you do with that market size information if you had it? What difference would it make?