Market Sizing

MARKET SIZING & MARKET FORECASTS 101

OVERVIEW

Market Size refers to how big a market is in terms of revenue, sales, or users/customers at a particular point in time. Terms associated with Market Size are TAM (total addressable market), SAM (serviceable available market), and SOM (serviceable obtainable market). Most often, unless specified, the client will be looking for the TAM or SAM.

A Market Forecast is an estimate of what that market will be worth or the size of the market at a future point in time.

Here’s a useful way to think about determining market size:

GETTING STARTED

Step 1: Organize your thinking via template:

To help you get start on how to calculate, we’ve made a suggested template to help walk you through what information to look for. This template is great for both sourcing and writing!

Step 2: Databases for sources:

In many cases, Census data is a great place to start! Wonder has has a list of great databases we recommend looking at here. Make sure to use as current data as you can find (ideally from the past two years), as market size can grow or shrink rapidly.

Suggested starting point for search terms: market size, market estimate, market analysis, market forecast, target market, market segmentation, segmented out, re-segmented market, existing market, census data, assumptions, market research firm, competition, yearly revenue, profits estimate, sales, market share, potential growth, benchmarking analysis, consumer demographics, current purchasing trends, customer discovery, total addressable market (TAM), serviceable addressable market (SAM)

DETERMINING CURRENT MARKET SIZE

For these requests, you must come up with a number; either the revenue (in dollars or monetary units), the sales figures (in numbers), or the users/customers (in numbers).

In some cases, Market Size will be easy to find with simple search strings like “US market size athletic shoes 2017”. Specifying geographical region and year is important in ensuring you pull the right information. If you find it this easily, it is best to confirm it with a second, valid, reliable industry source, to ensure you’re giving the client accurate information.

If you cannot find it, then you will need to calculate it. Typically in these cases, you are able to find the Market Size for a previous year. To determine current Market Size, multiply the previous MS (market size) by the CAGR (calculated annual growth rate), which you will also need to identify from industry sources.

Here is a great resource to calculate CAGR: https://www.omnicalculator.com/finance/cagr

Look at this example to see how it’s done:

2015 Market Size: Industry X = $200 M; CAGR of 5.5%

$200 M X 5.5% (or 0.055) = $11 M

$200 M + $11 M = $211M (2016 Market Size)

$211 M X 5.5% (or 0.055) = $11,605,000

$211 M + $11,605,000 = $222.6 M (2017 Market Size)

Ensure that you clearly write out all the calculations you use for the client, and that any assumptions made are explained.

DETERMINING FUTURE MARKET SIZE

For these requests, you must come up with a number; either the revenue (in dollars or monetary units), the sales figures (in numbers), or the users/customers (in numbers).

In some cases, Future Market Size will be easy to find with simple search strings like “global market size smart cars 2020”. Again, specifying geographical region and year is crucial. If you find it this easily, it is best to confirm it with a second, valid, reliable industry source, to ensure you’re giving the client accurate information.

If you cannot find it that easily, then you will have to calculate it. Typically in these cases, you are able to find the Market Size for a previous year. To determine Future Market Size, multiply the previous MS (market size) by the CAGR (calculated annual growth rate), which you will also need to identify from industry sources.

Follow the example for conducting the calculations in the previous section on Market Size.

WRITERS: STRUCTURING YOUR RESPONSE

When writing a Market Sizing or Market Forecasting response, you will provide a comprehensive overview of the market itself along with the actual size (in monetary units or numbers).

The write-up should include:

Insights that first identify the Market Size, then provide related information.
An Overview that identifies the Market Size (using numbers), CAGR, and major factors impacting this market. If you triangulate, mention this in the first paragraph e.g. "While no pre-existing statistics for this market exist, I was able to triangulate an estimate based on available information."
An explanation of the methodology used for calculations or estimations. This should be included with the calculations, not in a separate Methodology Section.
An overview of the market, including any important information the client has asked for or of which s/he should be made aware.

If you are not able to find or calculate/estimate the Market Size for a particular market, then you will have to write a Partial Client Update or Full Client Update that includes as much related information as possible. Look at this 5-star example.

Past 5-star Examples for Reference:

Additional Resources:

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