The business plan is one of the most important documents for your business and determining the market size is a valuable part of the plan. According to MarketingProfs.com the market size equals the number of buyers in the market times the quantity purchased by an average buyer in the market per year. Take the time necessary and do complete research to determine market size for a business plan using this process.
Define who the target market is. Not all consumers will be your customers. Targeting means finding specific characteristics of the customer who would be interested in buying your product or service, such as demographics and geographics.
Identify sources to find this information. Go to www.census.gov to find the statistics and information for the demographic, geographic and business patterns to answer most of the information needed. There is also information through the online library system. Go to www.librarysites.info, click on the appropriate state and choose the library resource for your information search. Check out websites of the competition and do surveys and interviews with experts in your industry.
Analyze the data collected. Find out the existing customers you have, the customers who are using your competitor's service, and those who do not use the service at all. The total is the maximum potential customer for your business.
Research the trends in your industry. What is the average frequency of purchase of your product/service per customer? Multiply that frequency with the number of non-customers. This will give you potential new business. Find out the frequency and total number of purchases from other companies by customers. This is your potential business to capture from other companies.
Estimate how much of the market your business can reasonably get based on the total market size, industry trends and the competition information. Create a low estimate, a medium and a high estimate. Use the medium number to determine a projection of market size for your business plan.
Use these steps to determine market size for a business plan. It is a time consuming and tedious task but is valuable information for planning and marketing efforts for your business.