Startup Market Sizing

Market sizing is tough because markets are dynamic and ever changing. However, investors will not take you seriously if you say “you expect to capture 1% of a £100 billion market.” When you write your business plan and investor pitch, know your market and competition well and be realistic about your numbers.

Which market are you targeting? Is this market fragmented or concentrated? Is your available market big enough and how much of it can you capture? These are some of the questions you need to answer through your market analysis. Even If you do not need outside investors initially, you need a thorough understanding of your market to run a successful business.

The size of your market really matters. “How big is your market?” is one of the first questions investors ask. Before you spend a lot of time and money building your business, you need to figure out if you are targeting a market that is large enough to be viable over the long term. If the addressable market is too small, it will not be able to support a large company. For example, if your market size is estimated to be $100 million and it is not rapidly growing, then you will only be able to generate $2 million (at 2% market share) to $30 million in sales (at 30% market share) from this one market. You will need to find other potential markets for your product(s) to further grow your company.

Also, you don’t want to make the mistake of selling to everyone to make your market as big as possible when you launch your business. You cannot sell to everyone initially. Simple as that. While there may be multiple markets and segments into which you can sell your products or services, taking all of them on at the same time requires time and resources that you may not have. You need to focus on one market first, i.e. your initial target market or beachhead market.

The beachhead market for your initial product should be large enough to sustain fast growth for at least a couple of years. Once your company builds momentum, you can expand your markets and your product set.

#startupfounders #startups #founders #angelinvestors #getfunded #entrepreneursmindset #techstartup #venturecapital #startupaccelerator #entrepreneurship101 #entrepreneurs