Marketing Research/Calculating Market Size
Hi my name is Evan, an american and young entrepreneur starting a business in the Philippines. I stumbled across AllExperts hoping for some help.
I am pursuing to start a cafe/restaurant and stuck on the marketing section of my business plan. Particularly, calculating my market size. I've studied tons on this subject but can't get an accurate number. I'd love it if you had the time to shoot me back an email or two.
May I give you the gist of what I've got? Hold onto your seat... I'm winded :)
First of all, i've got a very accurate SAM (segmented addressable market) of 7,500 annual customers. This is not the question. I've also conducted a survey last week that gives me how many times each customer will buy from me. Where I am stuck is getting the SAM (served obtainable market) aka, how many I can really expect to walk through my doors. I've studied both the Top-Down and Bottom-Up approach to getting this, however i'm hung-up on one part. So.. let me show my what I have....
1 Sale = $6 or $2 per customer (customers are in groups of 3, so $2 each customer.
TAM: 7,500 (annual) Potential Customers
SAM: 3 visits/month per customer = 36 annual visits per customer.
100% market share (no competitors, first in marketplace) ????????????
Assume 50% Success Rate. 50% of 7,500 = 5,625 customers/visits or 18 annual visits per customer. 5,625 x 18 = 101,250 annual visits.
SOM: 101,250 x $2 per customer = $202,500.
1st Year, Projected Annual Revenue: $202,500
Katherine, as you see it all looks straight forward until I get to the SOM. I have no clue how to find my success rate.. "success rate" isn't even the correct lingo because i'm selling a product from a cafe.
None the less! I don't know how to calculate my SAM. 3 visits a month per customer is very accurate data, from my survey. However, only in a perfect world will I get ALL the customers in my marketplace, even if I have huge competitive advantages. I really do! The product is in high demand, and my customers are in a tightly women community in which I plan to take advantage of with Advocacy Marketing. But, I investors won't be satisfied with my guesses or assumptions.
My big question is, how do I find my SAM? How can I really know how many people I can get to come to me? Obviously this is up to my marketing. But, how can I measure this???? I need number and digits to show my investors. Please help me! I'm happy to share my hard data with you if you need it.
Thanks so much. Please reply!!!
Evan, the food industry is not my area of expertise. My best advice is to use the survey data that you collected to segment your market and come up with 3 estimates of SOM - optimistic, realistic and pessimistic. See if you can find some data from trade groups about the market share (that is really what SOM is) that a highly successful cafe has, and use that as a benchmark.