How to determine "market size" when researching ideas or creating a pitch deck?

1

How does one determine the "market size" for a business opportunity. Lets presume I'm selling mugs. How do I figure out what the market size for mugs is?

3

"Market size" is too generic a term - and presenting it as such without research will send pitch deck viewers packing. Break down your research into TAM, SAM and SOM and present something realistic.

Don't know what that means?

• TAM = Your Total Available or Addressable Market (everyone you wish to reach with your product)
• SAM = Your Segmented Addressable Market or Served Available Market (the portion of TAM you will target)
• SOM = Your Share of the Market (the subset of your SAM that you will realistically reach – particularly in the first few years of your business)

Do some googling on these terms - but here is a good first article to get you going from bplans.

2

Jim does a good job of breaking down different ways to describe your numbers - but how to actually gather statistics is a little different.

You asked about mugs. I'm going to assume tea/coffee mugs. I see you're from Indy. Let's try a little logic:

According to the United States Census Bureau the 2012 population of Indianapolis was 844220.

Let's assume that people under the age of 18 don't really use mugs. The 2010 demographics show that 25% of the population was 18 or under. 844220-25% = 633165 adults. You could state that this is your TAM.

Perhaps you believe that your target market is females between 18 and 65. In which case, we'd need to remove the over 65s (10.5%) and males (48.3%). That leaves us with 292974 which you could state as your SAM.

If you believe that you can get to 10% market share, you could claim that your SOM is 29297.

Which means you probably shouldn't get into a local niche market of mugs ;)