Commercial Potential - Market Growth

The rate of increase in market size, in percent per year, is indicative of the commercial potential of an invention. Growing markets generally invite (and excite) newcomers. They definitely excite investors. Furthermore, a growing market is typically more forgiving of optimistic projections that often underlie technology business plans.

Although complicated spreadsheets can be used to estimate market growth, so can the back of an envelope - which is the method recommended here. The basis of the calculation is as follows:

What is the annual percent increase in potential customer numbers?

What is the annual percent increase in the number of products (units) each customer will buy each year?

What is the annual percent increase in the selling price of each product?

To develop your estimate, simply add each of the above numbers (as a fraction) to one (add 0.05 to 1.00), multiply the three results together and round off the answer to two or three significant figures. Of course, there are many other ways to develop the estimate - you can ask an expert, ask a supplier of an existing similar product, use published market research data, etcetera.

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