Market size is an essential metric for any B2B startup, but it’s often difficult to determine just how big the market is. There are a few best practices to think about before finding your target market size and reaching out to potential customers.
First, think about why you’re starting a business in the first place. What problem are you trying to solve? Once you’ve identified that, brainstorm what industries or demographics might be interested in solving that problem too.
From there, figure out who those people are and what they do. This will give you some idea of where your target customer base can be found online and offline (e.g., on social media sites like LinkedIn).
Finally, use the Google AdWords tool’s keyword planner feature to find a list of keywords related to your business. You can even save this list for future reference, and it is free!
The most accurate way to determine the size of your market for a B2B startup is by choosing the number and size of companies within your industry.
The top-down approach would require you to take information from the market such as annual revenue, the total number of companies who operate in that field or serve customers who belong to that category, etc., and then estimate how much they contribute in revenues each year.
Then by projecting those numbers forward for a given period, you get an approximation of the potential future revenue generation capacity related to this market.
This is useful for product development and determining if there are any untapped segments.
If your product has been in the market for a while, customer feedback would be the best way to find out what it’s worth.
You must take customer feedback seriously; there’s no better way of establishing how well your business does than by asking.
Your customers will also let you know if they’re not getting enough of what they need or want from your company; this could be because of features on offer or because another company is doing a better job at fulfilling that need in one place.
What Is A Good Market Size For A B2B Startup?
B2B startups are often faced with the question of how big they should go. Should your startup focus on a niche or try to get as many customers as possible? What is the right size for a B2B startup?
The question of the optimal size for a B2B startup has been debated for years. The answer to this question can be different depending on who you ask and what industry they are in. One thing that most people agree on, though, is that it’s not an easy task to find the right market size.
There are a few different ways to answer this question. The first is to use the rule of thumb that it’s easier for a company with fewer product services and more potential customers (e.g., Sage) to grow than a company with more products and fewer prospective customers (e.g., Sling).
As such, they recommend a target market size of $5 million in cumulative revenues* or 100,000 actual prospects in the next year.
Alternately, if you are targeting small businesses as your primary customer base: Increase 5% year-over-year; targeted small business accounts will likely purchase 3 – 7 units per year.
Early-stage B2B startups usually require a minimum market size of 5 million people.
This is by no means an ironclad rule, but this is often the lower limit for these companies to pay overhead and salaries.
After all, that’s the point of starting a business to make money. But don’t take it as gospel- wait until you’re getting to product/market fit before worrying about how big your market is (grow first, get big later).
If you decide to strategize a business at a startup with a small market size in mind, consider that factors like targeting niche parts of the enterprise will have more potential upside than trying to go after enterprises wholesale.
What Is The Size Of The B2B Market?
The B2B market is made up of companies that sell to other businesses. There are over six million companies in the U.S., and these businesses have significant purchasing power, accounting for $3 trillion in annual sales. The size of this market means there’s a lot at stake when it comes to marketing to B2B customers.
The $3 trillion B2B market has surpassed E-commerce’s $1.59 trillion in only four years. With that growth, it will not be long until B2B takes over the top spot with a 91% share of business sales while E-Commerces at 9%.
Even though you may think this is good news for all businesses, the truth is that many entrepreneurs and SME owners are finding it difficult to survive in such an increasingly competitive landscape with better pricing schemes for buyers and other competitors who can offer similar services but at lower price tags.
The worldwide B2B spending was estimated at USD 15 trillion in 2021, with a CAGR of 4% from 2014-2021.
In North America, B2B accounts for at least 60% of total sales revenues. Average per capita spending increased by 23% over that period, while it decreased by 10% or less in Europe and the Asia Pacific.
What Is The Formula For B2B Market Potential? (2021 version)
With so many B2B companies to target, it can be challenging to know where to start. Luckily, a formula for determining market potential will help you decide which industries are worth your time and which ones should get left on the shelf.
The formula for B2B market potential is $N. P(x).
The term “market potential” in B2B industry jargon refers to the total revenue that industry has the capability of generating according to region, company size (sales), and sector type.
The formula for market potential is $N. P(x) where N – number of seats available in the company x- expected share per seat.
The formula for B2B SM market potential is $N(P*q)/Q, but this can’t be solved when you have unknowns in one of the fractions. If this happens, you’ll need to do some algebra or use a graphing calculator to solve the equation.
In plain English, isn’t what’s being calculated here? You’re trying to figure how much money can potentially be made with Q units of product sold at P dollars per unit.
Which Market Is Bigger B2B or B2C?
Marketing is a science, and it’s essential to know the difference between B2B and B2C marketing. When you’re marketing your company, one of the most important questions you’ll need to answer is whether you’re targeting business-to-business (B2B) or business-to-consumer (B2C).
The first thing that any marketer should do before starting a campaign is determine who they are trying to reach. Understanding this will help marketers create appropriate messages for their audience.
For example, some things that may be relevant when targeting consumers might not be as important when targeting businesses.
It’s a question of an age-old debate. Which market is more significant, B2B or B2C? There are some clear winners in terms of revenue generated by marketers who sell products to businesses versus marketers selling directly to consumers. ACCORDING TO MCKINSEY & COMPANY, the B2B marketing sector generates $6 trillion in annual revenues while the consumer segment only generates $1 trillion annually, according to McKinsey & Company.
In terms of the entire market, the B2B market is larger than the B2C market.
Business-to-business (B2B) market makes up a significant portion of the global economy, with an estimated GDP contribution of $15.7 trillion as compared to the business-to-consumer (B2C) markets which only make up about 1/3 of that amount at $5.1 trillion, or 32% bigger in size in terms of Gross Domestic Product contribution across all countries worldwide.
What Is The Difference Between Market Share And Market Size?
Market share refers to how many units of a product are sold about other products. It’s calculated by dividing the number of units sold for a given period by total sales during that time.
On the other hand, market size is calculated by multiplying unit volume (not revenue) with its price per unit. This gives you an idea of just how much money could be made if all teams were purchased at their respective prices.
For example, one company might have a 10% market share and $1 million in annual sales while another has a 20% market share but only $500K in annual sales because it sells its items twice as much as the first company does.
To know market share and market size for individual companies, we have to look at their respective market share or personal market size. So, two identical car companies would have two completely different sizes in any given year because each company is in another place regarding its competition and its customers.
A possible answer could include these sentences: Market share doesn’t provide any information about the physical area.
What Does It Mean To Scale A Startup?
Scaling a startup can mean different things to different people. For some, it’s about reaching the next level of growth, and for others, it means scaling their team and building out their infrastructure.
But before you start thinking about how you’re going to scale your company, you have to make sure that your product is scalable in the first place because if it isn’t, then no matter what kind of growth hack or marketing strategy you use, nothing will work.
What does this mean? First off, when we talk about scalability, we’re talking not just about a single idea but rather the idea as applied across all customer segments or geographies – meaning that if anyone can do what these customers are doing with our product, then there is an opportunity for more significant investment to reach further.
Some benefits of scaling a startup are increased firm income and productivity, an improved company culture through providing less uncertainty for employees, and a way to get people with similar interests together (clear some time for your activism).
However, there are downsides to scaling your startup, which boil down to the need for increased capital and responsibility with more employees.
The fear of managing more prominent workers than before may have managers becoming strict, while others become so lax their workers never do anything.
In some cases, though, there are startups that grow so fast that they reach a saturation point for their product before they have time to scale out their organization into funding rounds or partnerships or anything like that.
How Fast Do Startups Scale?
Do you have a startup idea? Well, it’s time to get going. It might seem like so many needs to be done before launching your company, but the truth is that startups scale fast. With some creativity and hard work, you’ll soon find yourself building an empire! Let’s take a look at how quickly they can grow.
The first step in scaling your business is setting up your team. Depending on what kind of product or service you want to sell, this could mean hiring employees for different roles: marketing professionals, salespeople, customer service reps, etcetera.
Next comes choosing which channels will best reach customers – social media sites like Facebook and Twitter are popular choices, and blogs and YouTube channels.
Usually, startups get too big of scalability issues because they have little money and resources, so instead of scaling, they have to increase gradually.
There’s no perfect formula or timeline, but in the end, you can’t spend any more time than is necessary getting your thing ready for production scale because you have to take customers as they come without being able to restrict access as larger companies do.
Growth depends on the startup and how much time impacts its development. For example, a newspaper stands outside of a coffee shop and will serve one customer per minute at most.
A robot capable of brewing coffee might scale exponentially faster than this until the factory maxes out and becomes saturated with demand for its product, requiring more factories to be built in different locations to keep up order.
In either case, the growth size can depend not only on time but also on other factors like cost-efficiency, competitiveness in the market, material availability, etc.
Conclusion
There are a few different ways to estimate the size of your market, and the first is by looking at how many potential customers you have in an industry, geography, or sector for your product or service.
Another way is by determining what percentage of people within that same group would be interested in buying your product over others already on the market.
A third approach considers both approaches and then uses algorithms that predict future growth rates based on current data trends, demographics, and related factors such as competition levels and company performance metrics (i.e., revenue).
If you want to find out your startup’s potential, take a look at these different ways to calculate your company’s potential for success in this blog post.
Many factors affect how fast startups scale and whether or not they will be successful, so it is essential to do some research before making any decisions about scaling up or starting over with another idea altogether.
Glossary
Market penetration is a marketing process used to measure the rate at which a product or service penetrates the market. Marketers calculate how many people know about and use their products or services by counting the percentage of people in the target market.
Software as a Service (SaaS) is a licensing model in which a company provides computer software for an annual or monthly fee to a B2B buyer. The benefits to a B2B company to this type of business model are that it enables the potential customer to subscribe to the software without investing in expensive purchases. It does not require an IT department or specialized skillset because it typically runs on remote, centralized servers.
For a startup founder or B2B marketer, an “addressable market” is the collection of people who can have their needs met by your company. The question is, “Can you sell to this person?” If so, they’re in your total addressable market and will probably be interested in what you’re offering in the product market.
Demand generation is a market strategy used to create demand for new products, services, or ideas. The sales rep identifies potential customers and the suitability of the product-market fit with the intent of stimulating, sustaining demand, and creating market opportunity.
A buyer persona is a theoretical representation of a new customer who might buy the organization’s product or service. Essentially, when designing a new product or service, you should pretend that you’re someone else – like an ideal customer profile – and ask what your needs would be; then reverse-engineer services and products to address these needs. Various factors are used to develop this fictional customer profile to represent your different target audience with an accurate and market segment set of insights about their wants, needs, and motivations as part of the sales process.
The value proposition is made up of two key elements: perceived “audiences” and benefits. Market sizing and audience segmentation is an important starting point for understanding people’s needs in the new market because segments will vary in importance to your customers as well as the products or solutions they’re looking for. One rule of thumb is that it’s easier to deliver within the sales cycle existing customers closer matches when you start by targeting specific audiences in a marketing campaign with tangible benefits (or solutions).
Saas startup is a business model where most of the company’s functionality is based on a software program delivered as a service over the internet.
A sales strategy is a series of actions designed to create and capture opportunities in the marketplace.
B2B sales are made when a company sells goods or services to another business rather than consumers.
Lead generation is the process of creating and capturing leads for a product or service. B2B Leads are potential clients with whom companies have never interacted and are being targeted to bring them on as customers, often specifically for a particular business.
Content marketing is a strategic digital marketing method focused on creating and distributing valuable, relevant, and consistent content to attract, acquire and engage a clearly defined audience. With a quality content marketing plan, businesses can use a marketing team to beat a competitor looking to hire the same customers.
