When evaluating your idea, you are going to want to get a rough idea of how many customers you can get and how much money you can make. Potential investors are going to look at those numbers too. The bigger the numbers the more potential they will see in your business. If the numbers are too low, then you are going to have to revisit your product idea or possibly scrap it altogether.
Using the example of an iPhone game for kids we will look at how to determine your total market size.
Apple has sold approximately a billion iPhones and iPads. You would love it if every single one of them bought your game. That is your total addressable market (TAM) which is every single person who could possibly become a customer.
However, your game is in English and a lot of those devices were sold to people who do not speak English. Let’s say that half of those devices are owned by people that speak English. This is your serviceable available market (SAM) or portion of TAM that you can sell to. In this example that is 500 million people.
Of your SAM, only 25% of them have children and would possibly want to buy your game. Those 125 million people are your serviceable obtainable market (SOM) which is also called your target market.
You can use Google to search for market size figures or ask your local librarian to help. Additionally, people love to help students so you can call local businesses that sell similar products and ask them if they can help with those figures. You might find they can help you with a lot of other things as well.
No business sells their product to every single person in the target market so keep looking for characteristics that will narrow your scope. You can use the ideal customer exercise to get an idea of what those might be. This will pay off later when you start marketing as it is easier to market to a smaller niche than it is to your entire target market. Start small with one niche and once you are successful with that you can expand to other niches until you have covered your whole target market.
Finding the total market size for your product is not an exact science. There is a lot of guess work involved and assumptions made. What is most important is that you are honest with yourself when you calculate it and with potential investors when you present your business to them.