Evaluating the size of your potential market
The idea looks great, there is buy in from stakeholders, its all looking rosy, should you take the next step and make that investment?
Or perhaps there are two ideas for the same market, one is super easy to implement with low investment and the other requires higher investment but the market share could be higher. How can you start evalue the best route to take?
What size of the market do you need to go after to make an impact?
The video below explains how you can take some easily found numbers out there and use them to start to make decisions.
You may know there is a market you want to get into but don't know how to create fantastic ideas for that market, if so this set of tools may be for you
This is an example of that I put together for one of our customers very, very early stage business. And it was really to try and do a bit of calculating evaluating about the size, the potential size of their market.
So the product they were looking at was it was a weights lifting accessory and quite niche, but definitely market out there a growing market. So we went through some numbers and it's shared the sheet with them so that they could do some more calculations. So there's, there's quite a lot missing from this, but it shows you a process of starting to get some numbers out of data that you can find out there online. You can find lots of things to do with market size.
There's lots of companies out there that sell reports often cost two to three grand, and we'll give you a breakdown of the market size market value, growth rates, different areas of the world. The good thing about these reports as you don't actually need to buy them to get some useful data out of them. You can take a very, very top level number. They often give, you know, the kind of highlights of the, of the market. So for this global fitness equipment market, there is a report out there for relatively recently, that showing that the global market is $11.5 billion, massive, huge. And it's got a compound annual growth rate of 3.3%. So great. We've got some numbers we can play with, but what can you do with that massive number?
There was another report out there that gave us our breakdown of market size for different categories within that market. So we've got weights segment eight that gives you another number which we can start to use. So that's again, a massive number, 43 billion. The product we were looking at was an accessory for that segment. So I made an assumption of that, that weights accessory is 2% of that, that full market. That's a guess, but like all of this is a starting point. So what you do is you take your numbers and start to use it and you see what numbers might come out.
So for this product, this weights accessory product we potentially see at the moment out there, there's a market of $2 million, sorry, $2 billion. So that's the current market size. And also that the industry itself is from these reports has a compound annual growth rate of 3.5%. So year on year, that market size is growing by 3.5%. So that's excellent. We've got to figure we can start to play with, but what does that mean ?
From a industry expert, we've got some of these, a percentage valuation percentage for penetration numbers, which you can start to make an assumption that if you launch your product properly, you market it in the right ways that you might start to capture when you're one aim, 2% of the market and in growing to 7% to 16%. Now this is relying on marketing, obviously getting the product out there, selling it, but these are rules of thumbs for what percentage you might be able to assume. So for the global market, this product potentially could capture in year one, 50 grand's worth of sales. Now that's assuming it's selling worldwide. So this number, these numbers are for worldwide sales.
So you would, you'd have to make some assumptions if you're just going to launch in the UK first or maybe in Europe first, or maybe the US first . So for example, the US might actually represent half of this market. So you might be using half of this number to get your sales value, but 2% of half of that number would be then 25 grand.
Now, then it starts to become business decisions. Is it safe and simple to invest in a product development that, you know, potentially after three years you might be getting 300, 400 grand return on it, or two actually is the investment and a marketing dollar that you are going to have to make outweigh any growth or sales you are actually going to make.
So just a simple way of showing that you can take some really quite basic numbers that. you can find easily online and start to break them down and build a business case, or even just evaluate if this product costs 400,000 pounds for a hundred thousand dollars to develop, you're not going to see any return in your money in the first few years now that's excluding any getting to market. So that's just developing a product and get to market.
You're going to have to market it, sell it brand, it distributed, you know, are you going direct to customers? And therefore you've got a cost of getting those customers, if you're going through distributors, they are going to take a cat and your, your, your margins are going to be lower, but you've got less marketing spend because the marketing's their responsibility.
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