Market Size

7 Steps to determining Market Size Whether you’re an entrepreneur writing a business plan or an established firm looking to introduce a new product or service, you will encounter the need to estimate the size of the market’s that you plan to serve. Keep in mind that you need a target market, just saying “everyone” is not going to help you be successful. To understand the concepts this presentation will follow a financial planner hoping to establish a practice in her community.

Step 1: Define your Target Market This step is vital to the success and accuracy of determining the market size. If you are unsure of the type of customer that you want to attract you will waste a tremendous amount of time, effort and money trying to get any customers. Market-sizing is easier when you know the exact group you are looking for. Our financial planner has decided that her target market will be married couples with young children.

Step 2: Determine the needs what your product/service This step requires some guess work and speculation. Look at your product/service and identify the benefit for your customers. Our financial planner’s statement might be: “Married couples with young children need my services because they must be prepared for the cost of university, as well as for unexpected emergencies such as disability and early death.”

Step 3 Identify the info you need Now that you have identified your target market and hypothesized about its demand for your product, what information do you need to develop your estimates? Our financial planner would need to know: The age distribution within the geographic area she serves; The number of households with children in that area; The distribution of family income in that area; Educational attainment and college enrollment rates for graduating high school students; How many competitors, direct (other financial planners and insurance agents) and indirect (stock brokers, banks with financial planning services, etc.) What financial planning services people buy and how much they pay. There are others, but this list is pretty comprehensive.

Step 4: Identify sources of Information Where will you look for the information you need? Stats Canada Surveys and focus groups… Internet Trade associations Chamber of Commerce Existing competitors

Step 5: Collect and Analyze the Data Once you gather the data it is time to analyze it and figure out what it means for your business. Let’s say that the area our financial planner wants to serve has 30,000 two-parent households, with an avg. family income of $120,000 per year, a median age of 32, and an average household size of 4. Immediately, the financial planner knows she is serving a young upscale market, and it’s very likely – without looking at the number of competition – that there will already be an above average number of financial planners trying to serve them.

Step 6: Estimate your Market Size Using the data you must now determine the number of people in the area that fit into your business model. The financial planner will look at the number of people who have insurance policies and how many will be able to afford her business. Based on the number of competitors and the potential customers she will be able to estimate her market share. Using this market share and what she charges for her servicescost shannon goodine shawna calhoun

Example and Class Task Now that we have reviewed market size, have a look at your venture and attempt to determine you potential market share. This is an example of a Specialty Clothing line in Fredericton How many customers in Target Market?- (Greater Fredericton pop =122,000) 8,000 men and women have been found to be interested in alternative fashion type clothing. How many Competitors?- 2 competitors, Betties, and Freaks Boutique. How much of the Target Market do you hope to capture?- 1/3 = 2,700 customers per year What does the average customer spend?- @ 75$ (prices range from 50 -350$) Market Size is a expressed in $, So, 75$ X 2,700 = 200,000$ per year Take the projected Market Size Dollar amount put this in the Cash Flow Forecast in the Cash Sales.