How to size a market before you enter it

A partner or a lender asks how big the market is, and the easy answer is a figure from a report on the whole sector. That figure includes buyers who are too far away, too large to take your call, or tied to a supplier for life. A better answer is a count you built yourself: the buyers you can reach, how much each spends in a year, and the share you could win. You can build it with a list, ten phone calls and one sheet. If your product is so new that no buyers exist, skip this and read how to test demand for a new product before you buy stock.

Start from a list you can phone

Imagine, as an invented example, a fabricator in Thanjavur who makes polisher and sifter spares for rice mills and wants to know whether the neighbouring delta districts are worth a service van. A national figure for "food processing equipment" would be useless to the owner.

The list came from three places: a trade association's member list, the mills named on the invoices of the fabricator's existing customers, and a drive along the main road to read signboards. Two hundred and some names, kept in a sheet with the town, the mill's size as best the owner could tell, and a blank column headed "fits". Every name and figure below is invented.

Build your own list from whatever such sources your trade has. Do not buy one yet. You will correct it with the calls.

Ten calls that fix the count

Phone ten names picked from different parts of the list, not the first ten. Ask the same three questions each time:

1. "Do you run a polisher or sifter of the kind we repair?" (Does the buyer fit?)
2. "When did you last replace parts, and about how many sets in a year?" (How often and how much?)
3. "Who supplies you now, and are you happy with them?" (Who holds the share?)

Ask for ranges. "Two to four sets a year?" gets an answer, whereas "what is your exact volume?" gets a polite refusal. Write the date and the person's role beside each answer.

In Thanjavur, four of the ten did not run the machine at all. They sold paddy and had the milling done elsewhere. Two said parts came from the machine's maker and they never thought of a local supplier. Three were open to a second source. One was already loyal to a workshop fifteen minutes away.

Turn the calls into three lines of arithmetic

Six of the ten ran the machine, so the owner marked about 60 per cent of the list as "fits". Of those six, three were open to a second source. That gave three lines:

• Reachable buyers: the list size times the share that fit.
• Spend per buyer: the sets a year times the owner's price, taken from the middle of the ranges heard.
• Share to win: start cautiously, with the buyers open to a second source, which was half of those that fit, not with every fitting mill.

For example, with 200 names, 120 fit and 60 are open. If each open mill buys three sets a year at ₹8,000 (illustrative), the cautious figure is 60 times three times ₹8,000, about ₹14 lakh a year. The shop would win only some of that, so the real figure is smaller still.

Multiply the three. Then run the sum twice more, once with the kind answers and once with the hopeful ones, so you hold a low, a middle and a high figure. If the high figure cannot pay for the van, stop. If the low one does, the case is stronger. The middle is where judgement lives, and ten calls will not settle it.

The count came out smaller than the owner had hoped, and the owner said so to a partner. The number was small and honest, and anyone could check it by phone.

Three sense-checks before you trust it

Is anyone busy? If the market is large, existing suppliers should look busy. Visit one. Three quiet workshops in a "big" market suggest the estimate is high.

Does it match your own customers? If you serve twenty mills in your home district and your list says sixty there, you hold a third. Does that feel right? If you believe you hold nearly all, the list is probably missing names.

What triggers a purchase? Mills replace parts at the start of the season or after a breakdown. A hundred buyers with one trigger a year do not give you a hundred sales a month.

A check on your own bias

You will want the answer to be large. Two habits help. Count only buyers you can name, and write down who you rang and what they said, so a doubter can read the calls too. If the sums only work when you assume a fifth of buyers switch, put that assumption in the open and test it with the next ten calls.

When counting by district is the wrong method

If you sell online across the country, a district count means nothing. Count what people search for and what rivals list on marketplaces instead. And if only a few giant buyers exist, name them all and read each one's buying habits; a formula over six buyers is false precision.

Make the first ten calls this week

Build the sheet, ring ten names, and fix the fit column before you quote a figure to anyone. A count like this is where marketing for a new area begins, and market sizing and opportunity assessment is the service for it. If you want a second view before you spend on entry, tell us what you need.