Startup Funding Espresso – How To Size the Market

How To Size the Market

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

Sizing the market is a key step in researching an industry.

Follow these steps to size the market for your startup.

Define the total available market which is anyone you can sell your product to.

Next, define the total serviceable market which is the segment of the market you can reach.

Then define the total serviceable obtainable market which is the portion of that market you can win.

With this information, you can calculate your market volume which is the number of transactions you can generate.

First, calculate the penetration rate which is the number of customers divided by the market size times 100.

For example, if you sell to grocery stores in a state, then your penetration rate is the number of stores you currently sell divided by the total number of stores in the state times 100.

Now calculate market value which is found by multiplying the average sale per grocery store by the number of stores you have.

If you sold $20K per year to a store and you are in 100 stores, then your market value is $2M.

Finally, segment your market into logical groupings.

In our example, we could divide the stores by geography and treat the stores in each direction such as north, south, east, and west as a separate segment.

Use these steps to calculate your market size, volume, and value.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding. Let’s go startup something today.

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