Market sizing is never accurate, no matter what method is used, but it doesn’t need to be. Remember that is better to be broadly right than precisely wrong. There are two strategies to estimate market size:
- Top-down “optimistic” approach based on total market size: start with a broad market size figure and narrow it down to the target market by using assumptions and statistics.
- Bottom-up “conservative” approach based on market trends: sum-up known data from market participants (supply and demand side). This approach is more robust since it takes into account the capacity limitations of the industry.