8 Best Ways to Assess Market Size and Data for Startups

8 Best Ways to Assess Market Size and Data for Startups: Estimating the market size and predicting the growth rate and revenue that will be generated is a difficult exercise for startups. However, it is extremely important to assess the market size and data for your startup before starting. It is important because if there is no valuation or miscalculation, your startup will either have to shut down or raise more capital which will dilute the equity.

Evaluating market size helps in finding answers to strategic questions such as the level of investment required and attractive growth targets. It also provides insights on potential B2B market volumes and key data points that are important for decision making and strategies. You can also check for hoteling software, and many businesses are investing in it.

Market size and data assessment is extremely important for creating a viable business plan for a startup and especially during investment rounds with investors. An exceptional team and a good product are not enough to convince investors to invest their time and money in a startup. Market size is what tells investors about the potential of your business. For example- food delivery startups have a huge audience these days, many businesses are looking to hire food delivery app development companies.

 

Market sizing provides a roadmap for achieving your business goals and objectives along with strategies. It influences a startup’s most important decisions, from hiring to pricing, raising capital, developing new products, etc. So, let’s take a look at the best 8 ways to assess market size and data for startups:

Understand the problem you are solving

To begin assessing market size you need to know what problem customers are facing and what your product’s potential is to solve that problem. Many startups ignore this step and promote their product without understanding the benefits and value of their product to the target audience.

If startup founders first understand the problem and the value their product creates to solve the problem, they will be better able to promote their product. They can also create a story around the product to attract more customers.

Identify your market segment

No company has 100% market share regardless of its revenue and size. As a startup, you can achieve between 1% to 5% market share of your target market in the early stages.

So, the first step is to identify your market segment. Find market share or industry categories for your market segment. For example, Airbnb identified and captured its market sub-segment in 2007 due to a shortage of hotel rooms. Identify your initial pool of target customers and build a stronghold before you consider expanding.

Estimate your market share

Conduct top-down market sizing to assess the total market for your product. A top-down approach involves estimating the entire market and narrowing down the share based on your business information, target market and perception of the target market you can capture.

You should also establish a realistic estimate for the market share of your product or service. For example, if you are in the hospitality industry and travelers spend $23 billion on vacation rentals. Additionally, a large hotel chain accounted for $13.8 billion of the total amount spent by tourists. That leaves just $9.2 billion for you to determine your market share.

Bottom-up analysis

In this method, instead of crunching big numbers, you need to estimate your potential sales. Sales are estimated by analyzing where the product or service can be sold and market share carved out based on production capabilities, sales force size, and distribution capabilities. Therefore, a bottom-up approach is based on sales-related data of your product or service.

To follow this approach, you need to determine the sales territory for your product, the number of locations to stock the products, and the number of comparable products that sell. Compare these numbers with the overall market and calculate your share. If your stake is between one and five percent, the plan is realistic.

Consider your competition

When starting any type of business, you always need to know your competitors and industry inside and out. You should figure out what kind of companies are leading in the industry and how crowded the industry is. For instance, if you are the sole manufacturer of a particular product in your region, it may be possible for you to capture a market share of 50% or more. Similarly, if your startup is a new airline in the airline industry, the chances of getting 10% market share are even lower. Therefore, you can assess your market size by knowing your competition and their market share in the industry.