Business Solutions

When launching a business into the marketplace is not a good idea to assume that just because you show up the market gets bigger, since most of your business will come at the expense or loss of market share from the competition, or from their slice of the pie, and the real question is, of course, just how big is the pie? Remember, and market segmentation, any market niche worth considering must be measurable and substantial enough to be profitable, and to test this criteria you must estimate the size of your chosen market segment, also, most formal business plans require you to provide some estimation of the size of market you are targeting as most investors will want some answer to this important question.

Another reason to estimate the size of your market is to test for market saturation and market saturation occurs when there are too many competitors competing for the same market segment, and one way to measure this is to do a peer comparison of like markets and see how many establishments per how many customers there are and to make a correlation to your market.

A good place to begin is with the economic census produced by the US Census Bureau, but before you start, however, you will need to determine the geographic scope of your market including your market’s geographic boundary, and next you would need to know your business NAICS code, and with that information in hand, you are ready to go to the economic census online.

Another way you can estimate the size of your market is to use population figures of your targeted market multiplied by the average expenditure or amounts for the market, and this information is also available at the US Census Bureau’s website.

Another important factor that should be considered when developing your market size and share analysis is the underlying population required to support your business and generally this calculation is also based upon statewide data, and you can approximate this by dividing the population by the number of establishments which will equal the average number of people per business. When you compare the number of potential customers per establishment in your local area to the state average you will be able to tell if there are enough consumers to support your business.

Another method of evaluating your potential and the market is to calculate a breakeven analysis to determine what percentage of the market’s population you would have to capture in order to succeed.

Calculating the size of a business or industrial marketplace is a little trickier, and the best way to approach this problem is by using the Business Expenditure Survey report from the Census Bureau to find what you’re customer spend on your kind of product and services, and using this survey you need to find the business market your business is targeting and the closest respective expenses.

It is important to realize that there is a significant amount of information you can find on the Internet specific to your industry and location that can give you a very close approximation for the size of their market and the average revenue of the industry in your specific state, along with average expenses that you can use to determine benchmark information for comparison purposes when projecting your target market size and its potential revenue.

This information can help you determine whether it is feasible or not to pursue the business project based on both assumptions and market information and all of this information should be included in detail as part of your business plan.