What is a Market Size Assessment?

A Market Size Assessment is an analysis conducted by businesses to determine the total volume or value of a specific market in terms of sales, revenue, or other metrics. It provides an estimate of the overall size and potential of the market where a business plans to operate. This assessment helps entrepreneurs understand the scope of the market and make informed decisions about entering, expanding, or targeting specific segments within that market. A method commonly used to undertake a Market Side Assessment involves a three step process:

How does it help me?

"Understanding the Total Available Market (TAM) can be incredibly helpful for someone trying to sell a product or service in several ways:Market Sizing TAM helps you quantify the overall size of the market for your product or service. This information is essential for assessing the potential revenue and growth opportunities. It can also help you determine if the market is large enough to sustain your business.

Targeting Once you know the TAM, you can identify your specific target audience within that market. This is called the Serviceable Available Market (SAM) or your addressable market. Knowing your SAM helps you focus your marketing and sales efforts on the right customers, making your campaigns more efficient and cost-effective.

Investor Appeal When seeking investments or funding for your business, investors often want to know the TAM. It demonstrates the scale of the opportunity and can make your business idea more appealing to potential investors.

Competitive Analysis TAM can help you assess the level of competition in the market. If the TAM is large, it might attract more competitors. On the other hand, if the TAM is relatively small, it could indicate less competition but possibly limited growth potential.

Pricing Strategy Understanding the TAM can influence your pricing strategy. For instance, if the TAM is substantial, you might choose a premium pricing strategy to capture higher profit margins. If the TAM is smaller, you might opt for a lower price point to attract a broader customer base. Market Expansion As your business grows, you might consider expanding into adjacent markets or offering new products or services. TAM analysis can help you identify these expansion opportunities by quantifying the potential demand in these areas. In summary, TAM provides a clear picture of the market's size and potential, helping you make informed decisions about how to position, market, and sell your product or service. It guides your efforts, makes your business more attractive to investors, and helps you tailor your strategies for optimal results in your chosen market.