Share Estimation of new market potential is a crucial point for the business planning behind any startup or enterprise expansion. Hopefully, after reading this post, you will be better equipped to make grounded decisions in terms of the level of initial investments in MVP, market share planning and further scalability.
It’s a great idea to incorporate a separate budget for R&D into your business plan. However, if this isn’t possible, you still need to find a relatively cheap way to evaluate the market volume. Even when all you can do is to implement a DIY approach. Here I’ll share what can be done.
Before getting to the point, let’s check some definitions. This will help make the logic of the market volume calculation more transparent. Later on, I’ll illustrate how market volume can be calculated for one particular project and how to evaluate your share of the pie.
Qualified available market – those who are allowed to use the products or services you offer. For example, for UK alcohol sellers, the qualified available market would be limited to buyers aged 18 and over.
The quickest, cheapest and most precise way to estimate the market is to collect the evaluations that have already done by professional marketers. (Buying a report about your segment can be a good start to save you time and avoid building your forecast on the wrong data).
The market volume can be easily calculated with a reasonable degree of accuracy if you know the industry figures and its general trends (increase or stagnation). You can estimate your market volume by approximating these figures and estimating the percentage your particular market can hold.
If you’re coping with a new product or competing on an extraordinary local market, there can be no chance to estimate the market volume based on open-source data.
Field research will give you real data, and a better understanding of your customer needs if implemented professionally.
Practically, it’s a very complicated, time-consuming and costly method, where respondents must be collected based on the particular probability deviation. A typical error is to base the strategy on the opinions of several friends or neighbours. Properly managed research will serve as a strong foundation for future business planning.
If you need some guidance on the field research preparation, check it here.
Do IT Yourself: A rough estimation will not provide you with real buyers’ feedback or the exact figures. However, it can help you to evaluate the market volume. This can be done quickly and doesn’t require anyone’s help. Your data will lack real users’ opinions but can solve the main issue – calculating the volume.
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The next step after the estimation of the current market volume should be the forecasting of future periods. To understand the potential for your company’s growth, it’s vital to see the general market trends: increase, stability or stagnation.
It’s hard to believe, but in some cases, business “stagnation” is actually better than growth. Here are the most common reasons why:
Quite often, in order to understand the market situation, you do not need the exact figures. Even if it’s something totally innovative, the calculation of the market share and volume can be done via table research.
So, begin with the market volume, set a realistic goal to cover the market share and calculate the ROI for your startup. Jump to the next article for ROI calculation guidelines.