One of the key questions that any investor or lender is going to ask you is how big your market is. Market size is an important factor in the long-term success of a business.
The main issue at stake is how many potential customers are out there who might be interested in buying your product or service. Not everyone is a potential customer for every product, so you have to figure out just how many people you are trying to sell to. Once you have studied and measured the size of your current market, you are then able to segment your market and identify your target prospects, which come later on in the business plan.
When you are discussing the size of your market in your business plan, it is important to have credible sources backing up your data. You might go to studies by government agencies or well-known pollsters. That way, when you say that there are so many people who have a problem that your business can solve, you can point potential investors to your sources and get immediate acceptance of your data. You don’t want investors challenging you and debating you over your market analysis. Your data should tell the story itself and lead you into your target market.
Finding this information and establishing the size of your market will help you determine your marketing and sales goals. Once you know the total number of potential customers in your market, you should then segment that group into smaller groups so that you can determine who is most likely to purchase your product and service.
When discussing the size of your market with potential investors, also remember that you are not going to win everyone in that group at one time. To account for this, your marketing and sales plans should discuss how you plan to gain market penetration and what timeframe you are anticipating.
Having this fundamental background on your customers is an important part of your business plan. It builds the case for how big your business could become in the next five years. After all, if you don’t have a certain number of people in your market, how can you ever hope to sell that number of products? Measuring the size of your market gives potential investors an idea of the size of the idea.
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This article was originally published by SmallBizClub