Your Ultimate Guide to Sizing the Market
Pop Quiz! Which one do you agree with most about sizing the target market??
- You only need to estimate the size of your target market when you are starting out in business.
- The size of the target market does not matter because we are so good that business keeps coming to us through word of mouth.
- Knowing the size of your target market is essential for every business. You have to review your understanding of your target market at least once every few years.
If you agree with the first or the second statement you have a fixed mindset fuelled by the illusion that nothing changes and the market is the same as when you started in business. You would believe me when I say 2020 is different from 2019, yet may struggle to see the difference from the year you started in business.
If you agree with the first or the second statement and feel that after 10, 20, 50 or 70 years in business you no longer need to understand the size of your target market, then you are not alone.
You belong to the vast majority of business owners who are focused on the sole task of running a business day to day.
You are lucky, because you keep getting business without even knowing how large your target market really is.
If you think for a moment that this is just a New Zealand thing, think again. The world is full of businesses like yours, who would agree with one of these two first statements.
Why Does Knowing the Size of the Market Matter?
If you agree with the third statement, you have a growth mindset – well done!
By agreeing with the third statement, you are likely to have the desire to grow your business, and it’s likely that you’ve read a fair few business books.
Any. There must be hundreds of business books out there that say you have to understand your target market and have a fair idea about its size. This allows you to create better sales and marketing strategies and have a more realistic financial projection.
I treasure every connection with a person who has read these books and knows this fundamental of business. In over 20 years on New Zealand market, I’ve learnt that these people are far and few in between.
Wouldn’t you agree?
Do you feel that most business owners have read this in a book, or learnt it at University, or at some stage of their career?
I used to think this back in 2005 when we made the life changing decision to redirect the focus of our Art Studio to develop New Zealand’s largest business database. This would allow us, our clients, and anyone who needs it, to discover the size of the market available, and consequently how large their target market could be.
We thought we were building a tool for every B2B business. But it turned out that the fundamental idea about the value of knowing the size of one’s targets market, requires a lot more education.
Let me share a real-life story first, which happens more often than you might think – with some variations.
Imagine you have a product or service that is so specific, that there are only 10 companies in the whole country who you can target.
When you are not aware about the size of the market, then you will likely waste time and money by:
- Printing 1000s of promotional material,
- Hiring a team of sales professionals,
- Arranging a call centre to set appointments,
- Planning a Direct Marketing campaign,
When you are aware that there are only 10 companies that can ever possibly buy from you and that you have competition on top of that, you will conserve a lot of time, energy and money by acting smarter:
- Reviewing your financial projections to understand if your business can survive if only one out of those 10 companies will buy from you … after 3 years of courting – because this is how it can easily go.
- Re-thinking your value proposition and reviewing if there are other markets you can approach.
- Innovating ways to WOW these 10 companies and the right people involved in decision making.
- Investing a lot more time, effort and money to have one-on-one conversations with the right people. This is where corporate gifts or unusual direct mail is not an overkill, but is rather an essential part of getting your foot in the door.
Can you see how knowing the size of the market is 10 companies leads to a completely different set of actions and saves resources, time and money?
Fortunately, most businesses are in a better position. Even when your market is limited, you still have 100s or even 1,000s of companies you can target.
And that’s great!
The moral of “Why do you need to know the size of the market” is still the same, whether your target market is 10, 100, 1,000 companies or more. You can still waste resources when you are not aware of the actual size of the market. You might not get a precise figure because that’s challenging, but at least a reasonable figure that you can work with.
Read on to discover where and how you can get a better understanding of the size of your target market.
When you know the size of your target market, here is what you can do better:
- Better forecasting. You and your accountant can make much more accurate financial projections, do realistic forecasting and project growth of your business based on more accurate raw data starting from size of the market, and your target market as you understand it.
- Better budgeting. It goes without saying that when you are in control of numbers you can budget better. It all starts from how realistic your financial projections are based on market realities: size of the market + your historical ability to generate revenue + costs vs margin
- Better marketing. The choice of marketing strategy and tactics depends on the actual size of the market. What’s the point in having a billboard or placing ads (any ads) targeting everyone when you only need to reach to a couple 100 or a couple 1000 of companies and people that are out there.
- Better brand awareness. By knowing the size of your market, you can choose the best ways to build brand awareness with people who are directly involved in making purchasing decisions rather than to a random crowd who has no interest in your brand.
- Better sales strategy. Even if you are a well-known and influential brand, you can only grow so far. Imagine that you currently service 10% of the local market, then you definitely can aspire to double sales. But what happens when you service 55% of the market? There is no way you can double your sales! In fact, you can barely grow in this situation and have to put serious thinking about making efforts in order to capture more of the market share vs exploring other locations or offering different products and services to your existing customer base.
With all the valuable information you have so far, are you ready to take action and uncover the true size of your market?
If you already have a strong knowledge about what kind of companies you want to target, then you can submit an enquiry following this link right now and get an email with information about the size of your market based on your target market criteria.
If you are not quite sure how to define your target market – which is very common – then read along. You will get to know how to understand your target market better, so you can come close to this very important number: the size of your target market.
Ask and You Shall Receive
The size of your target market, is not hiding from you on purpose.
All your business has to do is ask for it.
FAIR WARNING. There is one challenge on the way.
You have to define your target market, otherwise sizing the market becomes mission impossible.
LITTLE KNOWN FACT: Most businesses find it really hard
to define their target market and choose
to leave this matter in the “too hard” basket!
Every day I get the chance to speak to at least one business which says exactly the same words: “Our target market is very hard to define, because we offer a highly specialised product/service”.
And every day, in response to that, 9 times out of 10 it only takes 15-20 minutes to define their target market at a reasonable level. Certainly, there is room for improvement but we have been able to uncover the base of who their target market is.
Guess what? My observation is that most people don’t know how to go about understanding their target market. While they can do it in 15-20 minutes with me or one of our data consultants, they certainly need hours doing it on their own.
You may have heard from other marketers that identifying your target market is a matter of careful research and various considerations.
While this is true and you can invest a hefty sum in market research, the idea about the usefulness of focus groups, and other types of research originates in business to consumer (B2C) marketing.
When it comes to business to business (B2B) marketing, education, socio-economic parameters and even gender plays less of a role in the way companies go about their purchasing decisions.
Think about when a company imports tools and consumables for hairdressers, then that means that the hairdressing industry is their ideal target market. Full stop and no questions asked.
Then, of course one can look into products more carefully to assess if beauty, medical and some other industries may benefit as well. They may be useful to be included in their target market, but definitely only as a second choice, right?
Over the years we’ve created a lot of useful resources to help you define your target market. I’m not inviting you to do any heavy lifting of trying to estimate the size.
I’m merely asking you to decide for yourself: who do you want to target?
Then leave us do the rest.
Take a few minutes out of your busy day to specify who you want to sell to. From there we will help you to get an assessment of the size of your market.
Here is how.
Download a simple two page crash course on defining your target market the right way.
It will prompt you to answer a handful questions on two pages, and then get ready to enquire about the size of your target market by following this link. In our experience, this is a great activity to do with your sales and marketing team to make sure their feedback and opinions count.
If you feel that this two page crash course is a it too brief to your liking, you can download ANZSIC 850 industry types from here and go over the whole list. While it will take a bit of time, it will also allow you to define your target market at a deeper level. Allowing you to get a more precise, and ultimately a more accurate sizing of your target market.
What about the size of the market?
While this article is about identifying the size of your target market, it’s not possible to measure the size until you understand what is your target market.
That is why the whole previous part was about identifying your B2B target market, along with the tools we have to help you get going.
If you don’t understand what kind of businesses are in your target market, how can anyone even start thinking about the size. Because there is nothing to measure, isn’t it?
Once you know the type of companies you want to target, then we can help.
As suggested earlier, all you need to do is to submit an enquiry following this link to the whoiswhere team and we would be delighted to identify the size of the market list that we can offer. The larger the companies you want to connect to, the more chances that we can offer you; as much as 94% of New Zealand market. Of course, there is less data for smaller businesses.
Is there a better way to identify the size of your target market?
It would be unfair of us to claim that whoiswhere™ is the only place you can get an idea about the size of your market. There are other ways to establish it as well.
The important thing is to be clear about what the limitations are for the source you are using.
Here are some alternative suggestions where you can source your market size, which you might want to examine, and a brief description of limitation of each source.
This is the most official resource when it comes to New Zealand business’s. It lists every registered company, trust and incorporated society in New Zealand and is updated daily.
Did you know there is an average of 4,000 new companies registered in NZ every month?
The limitations of the Companies Register that nobody is talking about:
- There is no legal requirement to register a company in New Zealand, so you can be in business and employ staff, without even being registered.
The implication of this limitation is that not every business can be found in the Companies Register. Some would argue that every serious business is registered, we have facts and figures to show that this is not true. There are plenty of well-established companies that trade without being a registered entity.
And there is at least one whole industry in New Zealand where hardly anyone is registered.
- The other limitation is that the entities listed in the Companies Registry might be not actively trading even when they are active. There is absolutely no way to establish if a company is actually operating by checking the register.
- Most companies don’t have any additional information about what industry they operate in, or how large the company is. There is now an option to voluntarily share this information. However, from what we have understood the number of companies who have shared any kind of additional information stands at about 10%.
- Last but not least, and the most disappointing of all, is that most entities listed do not have a phone number or other ways to reach out to them. In fact, there is very little information listed for the majority of companies apart from who owns them.
You might ask, but what about the registered address?
Often the registered address is the address of an accounting or legal firm, which completed the registration and has nothing to do with the actual company.
In fact, it could be in a different city, or even a different island (for example, an Auckland company can be registered by an accounting firm in Timaru).
If it is an address of one of the Directors, then it’s usually a residential address and also has little to do with the location business is operating from.
In conclusion, the Companies Register is a fantastic tool to find if the company is in liquidation, check how many years it has been in business, or check the spelling of a Directors name. But beyond that, it absolutely cannot help you size the market.
In fact, even using the total number of registered companies (around 500K) as an indication of the total size of New Zealand market is not possible, because according to our research over 50% of them are not individual trading participants in the market. They’re family trusts, property trusts, and other 0-employee holding companies.
The source of official New Zealand data. StatsNZ produces a lot of useful information that every business can benefit from. It’s official. It’s current. It’s based on the best statistics and information that you can get hold of.
The limitations of StatsNZ that nobody is talking about:
- It is statistics, i.e. it’s accurate on a nationwide level.
So when an accountant in Timaru registers a company operating in Auckland, from a statistical view point this company is counted as a business in Timaru.
This happens more than you might think, and affects the results of you market size if you are interested in a particular location.
Another example is 1000+ businesses counted against the address 105 The Terrace, Wellington. No, you didn’t miss the largest building in NZ with hosts 1000+ companies. This is the net effect of a legal firm which has registered over 1000 companies – with the registered office as 105 The Terrace.
- Part of statistics is to use the industry classification to understand the market. Assigning an industry to a company or other entity is an interesting and somewhat blurry process, which might require additional work to understand.
Reach out to me directly if you want to know more about the relationship between statistics and real life. You really have to understand the source of StatsNZ information to make sure your conclusions are relevant to the reality of businesses you can identify and trade with.
- Statistical data does not go down to the micro level of individual business, so it might be all good and well to establish the size of your target market, and then what? There is no way to identify who these companies are.
Bottom line? StatsNZ is a much better source of information than the Companies Register to help you size the target market.
The biggest downside?
It does not provide you with actual details of the companies in your target market. And let’s face it, understanding the size of your market is very important. Once you know it, the next logical step is to find out who they are!
There are a number of databases in New Zealand and we have an overview of what they are, how much information each one provides, and how to understand which ones will be a good fit for your project.
The limitations of Business Databases that nobody is talking about:
- Most databases don’t even tell you what they are doing to ensure that they have a good market coverage. This means any number of businesses, in any niche they have, are hard to understand in relation to 100% of the market.
For me this is the fundamental challenge of any business database.
What is the relation to 100%?
Because if I don’t know the relation to 100% then what is the value of any list.
Over the years I discovered that many business owners are not worried about it.
Until they want to grow. Or until their overseas head office wants to assess the potential of the market.
If you were ever in a position to understand the true size of your target market in New Zealand, you would know that it’s a hard and un-rewarding job. Mainly because there is no one to turn to for the answers.
In reality though, that’s a lie. In 2005 we recognised this problem, and established the whoiswhere business database in an attempt to record all businesses based in commercial premises. The aim is to get as close to 100% of all businesses based in commercial premises as possible.
Yes, this does not cover all businesses in New Zealand.
Yes, not every business in commercial premises has signage, and without the signage they are invisible to the world and to our street walkers.
Yes, some signage in New Zealand is in a foreign language and we can’t always capture it.
But, despite all of this, whoiswhere is the only database in NZ and Australia, which is focused on getting to know every business in commercial premises.
We are doing this expensive and labour intensive work to be able to say, we know more commercially located businesses in New Zealand than anyone else. Yes, it’s not 100%, but it’s as close as we – or any other database – can possibly get it.
This is the reason why we typically have 40-60% more businesses than any other business database provider.
- Many business databases do not distinguish between a head office and a branch of the company. That effectively inflates the numbers, doesn’t it?
Let me explain: there is only one true head office for the Warehouse, Fonterra, McDonalds, etc.
I bet you wouldn’t be impressed if between the three companies above, you only found 300 contacts … not unless you specifically need that small number of contacts for whichever reason.
Can you imagine how inflated those numbers could be if 300 various business addresses were counted instead of 3 overriding companies?
- Business databases are maintained differently. To ensure the accuracy of data you are receiving, you’d better check what the database maintenance routine is first.
The bottom line is that business databases are a really valuable source of information (that is hopefully accurate enough!) about the exact businesses in your target market.
They can also provide an indication of the size of your market, which you then can compare with StatsNZ to ascertain if you are getting access to sufficient percentage of the market.
Does that all make sense? Are you ready to take action?
Lets get going and use one of the links throughout this article.
Once you’re ready to gain access to best size of your target market, get in touch by emailing firstname.lastname@example.org