Tips on Defining the Size of a Market for a Startup Business

One of the most important factors in any small business startup is knowing, or at least attempting to predict, the size of your target market, often called the “total addressable market.” This is the number of potential customers, clients or businesses that you can hope to reach who may be interested in your product or service. Defining the total addressable market can be difficult, but correctly assessing your potential target market is key to calculating whether your marketing plan is sufficient, or in fact whether your small business startup is viable.

Vendors And Products

The first and most important step to defining your target market is to identify other vendors or products which exist in your space. How is your product different from theirs, and does it meet the needs of the people currently purchasing competing products in a compelling enough way that these individuals will be swayed or tempted to purchase your product instead? By determining what exactly you have to offer the consumers you are hoping to entice, you will be well on your way to defining your target market.

Be Realistic

Be realistic about your target market. A simplistic example is the idea of selling a car. It may seem as though, with more than 300 million people in the United States selling a new car should be an easy enough task. However, out of those 300 million, how many are of legal driving age? How many are too old to drive? How many are in the market for a new car of the type you are selling? Everyone would love to sell 300 million cars, but only a fraction of those individuals are your target market.

Develop Business Plan

You will want to develop a realistic business plan analyzing your target market. As you distribute this plan to potential investors, they will offer feedback on your target market calculations based on their own experiences in the marketplace. You may receive valuable information you never thought of simply by showing your plan to others involved in similar ventures.