Here are 2 Methods to Measure Market Size for Startups/Businesses
Market Size is a measure of whether your business is worth running or not. The larger the market size obtained, the more feasible your business is to run.
Market Size aims to predict the number of potential users and the income that will be obtained later. Market Size is also an important element when you are looking for investors. Usually they ask this to the owner of the startup/business to be invested in.
In measuring Market Size there are 2 methods used, namely Top-Down Market Sizing and Bottom-Up Market Sizing. Which one do you think is good?
Bottom-Up Market Sizing
The Bottom-Up Market Sizing method is a method of calculating market size starting with a specific customer. The process of calculating the market size of this method is carried out if the startup owner is constrained by resources to reach the market. Startup owners can get a measure of market share along with projected growth.
For example, in the image above, a startup focused on education is identifying its target market. They start counting how many SMA in the area they want to target. Then, measuring how many grade 3 students will take the exam and finally measuring how many students are already using smartphones and the internet.
Top-Down Market Sizing
Top-Down Market Sizing is a Universal Market Size calculation method. This measurement process starts from a large scope and then continues to decrease according to the target market to be addressed.
If seen from the example above, we can conclude that this method performs subtraction in stages. From the general market share figure obtained (in this case internet users in Indonesia), it is subtracted again by the percentage of students, and reduced again by the percentage of students and using the internet. The result of this reduction is the market size.
Both are good to wear, it all depends on the needs. If you are a new startup, it is recommended to use Bottom-Up Market Sizing because it does not require large resources to search for data.
