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PMA Market Sizing Template

Estimate your potential market size to help determine your potential buyers, potential revenue, and marketing strategies.
Product Marketing Alliance
Market sizing is the act of estimating the potential of a market, including the total number of potential buyers and the total revenue they may generate.
It can be used to estimate how much profit a new product or service could make, and help those in the C-suite decide whether or not they should invest in the market.
The information you’ll gain from market sizing can also help develop a unique marketing strategy and can be used to estimate the resources and manpower you’ll need before you launch a new product or service.

Methods

The two most commonly used methods are top-down and bottom-up.
Top-down looks at the relevant market size for your product and calculates how much profit your company stands to earn from it. Although simple, this method can be unreliable.
Say for example your organization specialises in computer software for finance companies, your research finds that there are 5,000 relevant businesses in your country. The average sale per finance company is $40,000, so that makes your market size $200M. Providing of course, every single finance company you approach agrees to the sale, and buys $40,000 worth of product.
As you can see, a wildly optimistic figure.
The bottoms-up method is a little more time consuming than the above, because you're relying on actual market research instead of generalized forecasts. This way you’ll get a much more accurate picture of your potential market.

How to calculate market size

Define your target market
Use market segmentation to divide your market into specific groups to give yourself a better understanding of who your product will appeal to.
Once you've identified the different segments you think your product will appeal to, choose the ones you want to market to to build your client base.

Determine the size of your target market
You could start this process by contacting business organizations, data providers, civic organizations or regulatory agencies, do as much research as you can to source a list of potential clients.

Market research

Assess interest by:
Conducting individual interviews
Focus groups
Surveys
* Remember the bigger the sample, the better the analysis.
Ask questions like
Does this product interest you?
What would you pay for this product?
How likely are you to purchase this product in the next two years?

💡 Tip: Conducting this kind of research takes time, make it count by taking the opportunity to gather any other market research you might need.

Calculate potential sales

Now you have a more realistic figure, you can use this data to decide whether your product is worth the investment.
Develop a financial model of your business
Using the data you have gathered develop a financial model of your business using:
Cash Flow forecasting
Net Present Value (NPV) and Internal Rate of Return (IRR)

Identify key assumptions
Identify key assumptions in your financial model and test them using:
Scenario analysis
Monte Carlo analysis


Methods
How to calculate market size
Market research
Calculate potential sales
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