{"id":36368,"date":"2023-03-07T12:15:50","date_gmt":"2023-03-07T12:15:50","guid":{"rendered":"https:\/\/swoopfunding.com\/za\/?post_type=blog&#038;p=36368"},"modified":"2024-06-06T19:34:39","modified_gmt":"2024-06-06T19:34:39","slug":"how-to-calculate-market-size","status":"publish","type":"blog","link":"https:\/\/swoopfunding.com\/za\/blog\/how-to-calculate-market-size\/","title":{"rendered":"How to calculate market size"},"content":{"rendered":"<div class=\"aivoov-player-block\">\n\t<div class=\"read_this\">Read this article to me<\/div>\n\t\t\t<style>\n\t\t\t.plyr__controls .plyr__controls__item:first-child{\n\t\t\t\tbackground:#2e9c8e !important;\n\t\t\t}\n\t\t\t:root{\n\t\t\t--plyr-color-main:#2e9c8e;\n\t\t\t--plyr-audio-controls-background:#f0f2f4;\n\t\t\t--plyr-audio-control-color:#546a7b;\n\t\t\t}\n\t\t\t[data-plyr=\"mute\"]{color:#2e9c8e !important}\n\t\t\t.aivoov-text-color{color:#546a7b}\n\t\t<\/style> \n\t\t<div class=\"audio_player\">\n\t\t<audio class=\"js-player\" controls=\"\">\n\t\t\t<source src=\"https:\/\/monky-voice-over.s3.amazonaws.com\/aivoov\/781640cc-7bc1-4bbf-9492-22dedc19678b\/d4387de0-e1c8-4198-9dac-0aa3e9460a38.mp3\" type=\"audio\/mp3\">\n\t\t\t<source src=\"https:\/\/monky-voice-over.s3.amazonaws.com\/aivoov\/781640cc-7bc1-4bbf-9492-22dedc19678b\/d4387de0-e1c8-4198-9dac-0aa3e9460a38.mp3\" type=\"audio\/ogg\" \/>\n\t\t<\/audio> \n\t\t\t\t <div class=\"powerd_by aivoov-text-color\"><p><a rel=\"nofollow noopener\" target=\"_blank\" href=\"http:\/\/aivoov.com\/?um_source=plugin_powered_by\" style=\"color: inherit;\">Powered by AiVOOV<\/a><\/p><\/div>\n\t\t \n\t\t<\/div>\n\t\t<\/div>\n\n\n\n<p>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.&nbsp;&nbsp;<\/p>\n\n\n\n<p>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<h2 class=\"wp-block-heading\">What is market size?<\/h2>\n\n\n\n<p>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.&nbsp;<\/p>\n\n\n\n<p>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.&nbsp;<\/p>\n\n\n\n<p>There are two types of market size to calculate as well as your business\u2019 expected share.<\/p>\n\n\n\n<p>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<p>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<p>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.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Why is market size important?<\/h2>\n\n\n\n<p>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<p>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.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How do I calculate market size?<\/h2>\n\n\n\n<p>Take a look at the steps below to help you calculate market size.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Define your target audience<\/h3>\n\n\n\n<p>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<ul class=\"wp-block-list\">\n<li>Age range<\/li>\n\n\n\n<li>Location<\/li>\n\n\n\n<li>Education<\/li>\n\n\n\n<li>Income bracket<\/li>\n<\/ul>\n\n\n\n<p>As part of this, it\u2019s also worth doing a bit of desk research. For example, if you\u2019re launching a new range of healthy snacks, you might want to find out how many people in South Africa are overweight, as well as how many people are trying to live a healthier lifestyle and why. You might also want to find out what products they currently use to eat more healthily.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Research wider market size<\/h3>\n\n\n\n<p>Next, you\u2019ll need to conduct some wider market research to find out as much as possible about your chosen industry. Look for available data from sources such as <a href=\"https:\/\/www.statssa.gov.za\/\" target=\"_blank\" rel=\"noopener\">Statistics South Africa<\/a>, industry reports and government whitepapers.&nbsp;<\/p>\n\n\n\n<p>Look into how much your chosen industry is worth and how much is spent annually on specific product types and average prices. Understanding more about your industry can help you work out who your competition is.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Review the potential value of your product or service<\/h3>\n\n\n\n<p>To understand the potential value of your product, you need to understand the benefits. While the features of the product are what your product does, the benefits are the results &#8211; how will your product make someone\u2019s life easier or better, for example?&nbsp;<\/p>\n\n\n\n<p>Have a clear list of the benefits of your product or service so that you can work out how valuable it will be.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Estimate total market demand<\/h3>\n\n\n\n<p>Not everyone in the target market will want to buy your product so you now need to estimate real interest and demand.&nbsp;<\/p>\n\n\n\n<p>Take a look at competitors who target the same group of buyers and consider their sales for similar products. It can also be worth surveying customers to assess how interested people would be in your product. Ask respondents how much they would feel comfortable paying for your product and how likely they are to buy it.<\/p>\n\n\n\n<p>When examining the results, make sure you\u2019re conservative. It\u2019s common for people to say one thing but do another, so even if they\u2019ve said they\u2019re interested, they might not actually buy the product.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Formula for market size<\/h2>\n\n\n\n<p>The formula below can help you calculate market size:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Number of target users x purchases expected in a given period = market size or volume<\/li>\n<\/ul>\n\n\n\n<p>There\u2019s also:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Market volume x average value = market value<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Example market size calculation<\/h3>\n\n\n\n<p>To give you an example of how these calculations work, let\u2019s say you\u2019re selling toothpaste for people with sensitive teeth. You estimate people will get through one tube every three months which means they buy four over a period of 12 months.&nbsp;<\/p>\n\n\n\n<p>Let\u2019s say you have 500,000 target customers. That means:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>500,000 (number of target users) x 4 (purchases expected over 12 months) = 2 million a year. This means your market volume is 2 million a year.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>To calculate the market value, you take the 2 million and multiply it by the average price of your product. So in this example, that\u2019s 2 million x R4 = R8 million.&nbsp;<\/p>\n\n\n\n<p>You could also estimate the percentage of market share you will be able to capture. So if, for example, you know the toothpaste industry is worth R1 billion a year, and you can expect to capture between 1% and 3% of this, that\u2019s worth R10 million to R30 million.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Making a projection over the size of your market<\/h2>\n\n\n\n<p>Understanding your potential market size can help you to work out your next steps as a business. You\u2019ll be able to assess whether it\u2019s worth investing in a new product or what growth you can expect.&nbsp;<\/p>\n\n\n\n<p>It\u2019s then worth looking at whether your market is likely to grow or shrink in the future. You can look at historical data to see which direction things could be headed.&nbsp;<\/p>\n\n\n\n<p>Also consider whether your customer base is likely to grow. If you think the marketplace is evolving, your product is more likely to be successful.&nbsp;<\/p>\n\n\n\n<p>As well as thinking about your own impact on the industry, also think about whether there are other companies\u2019 products on the horizon that could have a negative impact on the industry. It\u2019s important that you carry out the relevant research, including looking at patents being filed and setting up news alerts, to make sure you know what\u2019s being developed and have the best chances of success.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>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.&nbsp;&nbsp; As part of this, you\u2019ll need to know how to calculate market size. This guide explains what market size is, how to calculate [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":33173,"comment_status":"open","ping_status":"closed","template":"","category":[367,362,59],"class_list":["post-36368","blog","type-blog","status-publish","has-post-thumbnail","hentry","category-sme-support","category-swoop-guides","category-blog"],"acf":[],"featured_image_urls_v2":{"full":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-scaled.jpg",2560,1920,false],"thumbnail":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-150x150.jpg",150,150,true],"medium":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-300x225.jpg",300,225,true],"medium_large":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-768x576.jpg",768,576,true],"large":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-1024x768.jpg",1024,768,true],"1536x1536":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-1536x1152.jpg",1536,1152,true],"2048x2048":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-2048x1536.jpg",2048,1536,true],"image_blog":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-408x252.jpg",408,252,true],"image_blog_full":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-1775x660.jpg",1775,660,true],"image_podcast":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-397x298.jpg",397,298,true],"image_banking":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-27x20.jpg",27,20,true],"image_blog_internal":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-840x480.jpg",840,480,true],"image_blog_medium":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-1024x500.jpg",1024,500,true],"image_single_banking":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2023\/03\/market-share-featured-80x60.jpg",80,60,true]},"post_excerpt_stackable_v2":"<p>Read this article to me Powered by AiVOOV 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.&nbsp;&nbsp; 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. What is market size? 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&hellip;<\/p>\n","category_list_v2":"<a href=\"https:\/\/swoopfunding.com\/za\/category\/sme-support\/\" rel=\"category tag\">SME support<\/a>, <a href=\"https:\/\/swoopfunding.com\/za\/category\/swoop-guides\/\" rel=\"category tag\">Swoop guides<\/a>, <a href=\"https:\/\/swoopfunding.com\/za\/category\/blog\/\" rel=\"category tag\">Blog<\/a>","author_info_v2":{"name":"Rachel Wait","url":"https:\/\/swoopfunding.com\/za\/author\/rachel-wait\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/blog\/36368","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/blog"}],"about":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/types\/blog"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/comments?post=36368"}],"version-history":[{"count":2,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/blog\/36368\/revisions"}],"predecessor-version":[{"id":41436,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/blog\/36368\/revisions\/41436"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/media\/33173"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/media?parent=36368"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/category?post=36368"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}