{"id":34125,"date":"2023-03-07T12:15:50","date_gmt":"2023-03-07T12:15:50","guid":{"rendered":"https:\/\/swoopfunding.com\/ca\/blog\/how-to-calculate-market-size\/"},"modified":"2024-07-16T09:21:24","modified_gmt":"2024-07-16T09:21:24","slug":"how-to-calculate-market-size","status":"publish","type":"blog","link":"https:\/\/swoopfunding.com\/ca\/blog\/how-to-calculate-market-size\/","title":{"rendered":"How to calculate market size"},"content":{"rendered":"
\n\t
Read this article to me<\/div>\n\t<\/div>\n\n\n\n

If you\u2019re thinking about launching a business or product, doing your research and assessing how many potential customers you might attract is absolutely crucial if you want to be confident of success.  <\/p>\n\n\n\n

As part of this, you\u2019ll need to know how to calculate market size. This guide explains what market size is, how to calculate it and why it\u2019s important.<\/p>\n\n\n\n

What is market size?<\/h2>\n\n\n\n

Market size simply means the number of potential customers you could sell your product or service to. In other words, it\u2019s the size of the sales opportunity available to you. <\/p>\n\n\n\n

As an example, it could be the number of people visiting a high street who could become customers of a new ice cream parlour, or the number of car owners in your area that could use a new car washing service. <\/p>\n\n\n\n

There are two types of market size to calculate as well as your business\u2019 expected share.<\/p>\n\n\n\n

The first type is the total addressable market (TAM). In a nutshell, this means finding out whether the potential market for your business is large enough. It\u2019s the number of customers or amount of money you could earn if your business achieved a 100% success rate and 100% sales to every potential customer.<\/p>\n\n\n\n

The second is the target or available market, which is the size of the market that your business can realistically reach. It might also be referred to as the Segmented Addressable Market (SAM).<\/p>\n\n\n\n

The expected share of market is also worth adding to the above calculations. This helps you to work out what share of the market you want to aim for and what you are expecting your business to achieve. <\/p>\n\n\n\n

Why is market size important?<\/h2>\n\n\n\n

Market size is important because it helps you determine whether your investment is worth it. If you know there are only 100 people who would be interested in your product, you can assess whether this will be worth the cost of manufacturing and distributing the product, for instance.<\/p>\n\n\n\n

Knowing how many people your business can reach will also help you work out how much revenue you might generate and therefore how much profit you can make. <\/p>\n\n\n\n

How do I calculate market size?<\/h2>\n\n\n\n

Take a look at the steps below to help you calculate market size.<\/p>\n\n\n\n

Define your target audience<\/h3>\n\n\n\n

First of all, you need to think about the type of customer your product or service will attract and create a profile. Think about their key characteristics, such as their:<\/p>\n\n\n\n