Transcripts
1. Market size trailer: are you seeking full funding for your business? Maybe from a bank. A venture capitalist? Well, maybe just your balls. And each time they ask you to see question one issue expected revenue. What to say? Simply. How much do you expect to make issue is a fair question. They want a return on investment, but a leisure has been. Don't worry. There's a solution. Crash course, the market sizing today and learn how to estimate your expected record and answer the haunting questions so that you can get the funding. But you need to take your business to the next level, see it in class.
2. Market size introduction: for the moment less. Imagine that you work for linked in. You don't know how many users they are because this imagine that these are early days off Lincoln. You know that you make money but attracting users. So in order to know how much you would make, you would need to know how many users you would have. How would you find that out? Yes, again. Imagine that These are early days of Lincoln and you're looking to launch in the U. S. And you know that U. S population is 318 million. The same answer. The question of how many uses Lincoln could potentially attract Ken linked in potential attract 318 million users. Now it seems a little outrageous to think that absolutely everyone in the U. S. Will use lengthen. But that's precisely what some people do in the industry that's known as the Chinese glove problem. There are 1.4 billion people in China. I can sell 1.4 building gloves. Heck, I don't even need to sell a glove to f. You person in China only need a small share of that market and I would be successful that this is Chinese glove problem because leather Steiff deeper. Does everyone in China need gloves? This everyone in China, we'll have the money to afford gloves. Can you reach everyone in China, including those who live in a small farm in remote China without roads? Does everyone in China won the specific style glove that you offer? You have to get down to the details so less than narrow it down. You start with the total theoretical market. Yes, in theory, there are 1.4 billion people in China. But then you have narrowed down to the surf market. How many people actually need gloves off those? How many people can you address? How many people can you access? Can you really go to remote China with no road and no electricity? Then get down to everyone you can serve and you can actually access. Then define who's your target. A selling workmen's club and targeting workmen, old fashioned love and targeting fashionable ladies on every winter gloves for kids. One should get down to what you can possibly achieve and who you're targeting. You still have to drive demand, for example, even never figured out that you're selling Workman's Clough in Beijing. You still need to create, remember, perhaps advertising in the workmen district in baking. Just because you have an awesome product, you still have to make sure that people are aware of it and actually come to a storm by it . But that's a whole different topic entirely for now. We'll work out. How would week down to help It is your potential market.
3. Market size LinkedIn Case Study: this work through the example of lengthen. Imagine that you bought for lengthen and that you make money by attracting users. How many potential users would you have? How would you estimate how many users you were half a linked in? Let's start with the fact that U. S population is 318 million. Then you have to answer who do actually serve. Let's assume that linked and look to specifically served job seekers. In that case, you can do a little research to find data to help you with your estimation. Even quick online research will review the 71% of the U. S. Labor force is looking for a job. In that case, if the serve market is 71% applying the maths under 1% you know to be 206 million people in this 226 million people. How many cannot actually address LinkedIn is a website, So a key question would be how many people have Internet, more importantly, linked in its social network. So maybe a better question to ask. It's even how many people are active on social media with that in mind. Social media penetration according to research, is 56%. Social media by nature means Internet penetration, so this is a good number to have. This is also the way to make sure that your assumptions with each other and don't over assume. If I had initially applied the Internet penetration and then apply a social media penetration, you maybe end up double counting. So be careful with that. No. One. That social media penetration is 56%. That works out to about 126 million people off everyone that we can reach. Now we have to decide who do we specifically target? We can't develop a solution that works for absolutely effort one. So that's usually a target market. Defining a target market is in the self a big topic, and it's a lesson onto itself. For now, let's assume that linked in Target business professionals. And that means that there, at these high school educated, quick research on census data will show that 87% off the U. S population, 18 years old or older is high school educated. Now, with all that, our market is estimated to be 110 million people. If we look at how many users Lincoln have right now in the U. S. There's, AH, 111 million people users. So if we compare our ferry back of napkin math that we talk just a few minutes to work through, it's already a pretty close estimate. I didn't even look up any information the day that and in the street insider may have. These are just based on a quick Internet research, and this is a far more accurate estimate than the 318 1,000,000 users based on U. S population. This helped you funnel down and work through. Can you actually serve? Who can you access and who's your target? And we can get to some prey, close estimate, even with broth math, so there's no reason not to do this.
4. Market size LinkedIn Case spreadsheet setup: So let's look at how you set this up in a spreadsheet, which in real life is likely what you go use because it makes doing math a lot easier than trying to do in PowerPoint or in, um, with calculator or, if you really good doing your head, that's just fabulous. But most likely you're going to do it in a spreadsheet, so you'll see that I said up Total market served market addressable market target market exactly like how I laid out in the presentation that gave you. And then I clearly label What is this number? How many people are in the U. S. And then it's stranger 18 million people. That's from the Internet Research and I also put in here where I find the information just so that I can reference it later when people ask you, where did that number come from? How I can tell you it's from Google Public Dina and then 71% are job seekers, gets down to 226. You'll see that this is a formula. Is space multiplying? How many people are in the US? Multiply it with the 71% who had job seekers automatically give you 226 million. It's always recommended to use formulas. When you're doing calculation, the alternative is to do oh, I know 318 900 9000 The girl times, 71%. You get to the same number you could type in the number. But the problem is now, if you're looking at this cell, you may not know where there are. 71 ISS percent come from What? What? What is this? Because you may not have had a role here that's laying out perfectly clear. Also, let's say next year is no longer 71 is actually 80. You have to find whether the 71 come from from and how do you change it? And there's a lot less flexible to deal with as a spreadsheet. So as a rule from and general sprechen, maintenance is always better to try to calculate everything in the formula can and lay out all your assumptions out. Clearly, it's even better if you consider color coding assumptions in a specific color. It's then, you know, what are your, um, assumptions and what are your actual calculations that may match the color so that it doesn't confused me. So then now you know all the orange sells are where you input it, an assumption or imported a data point. And if at some point today the point changes, the rest of the numbers will calculate itself apt. So it's This is spreadsheet. Means is a general good idea. Layer your assumptions clearly, maybe even use color coding to help you figure out where are you assumptions so that you can clearly find it back. Because these are all assumptions. People may start challenging whether assumption, you mean you get a lie memory management or other stakeholder what their assumptions should be. So then, if you sell the spreadsheet correctly, it will really help you assess. You need to make any adjustments or make any change or us a market dynamic changes.
5. Market size Quiz: Now it's time for quiz. Imagine that you're trying to build a new apple. New parents. You know that the worldwide APP revenue is $35 billion. Can you potentially make $35 billion? I hope you know that. That was a trick question. You should know. Expect to make $35 billion. This number is not truly relevant. You need to get down to your product proposition. And who can you reach and who is your actual target?
6. Market size Project: here is a project assignment for you. Estimate how many uses with potentially down the your new app for your new parents? How would you go about estimating that you have to make some assumptions and do some Internet research in the Knicks module? I'll show you how I go about this assignment and assumptions that I make. That doesn't mean that my assumptions other only correct ones we're estimating, after all, more than one way to estimate. But the key is to make sure that we avoid the Chinese school of problem and truly think through the funnel and check our assumptions to make sure that we're not double counting.
7. Market size Project Solution: Okay, let's work through this exercise and estimate Hammond users Super Half for your potential New iPhone app for new parents. Let's start with the top of funnel that four million babies are born, you hear. But not all parents are first time parents, so we need to first find out what is the total market of first time. Parents based on census learned that 41% of families our household three. I don't have data on how many people of first time parents, so I'm using this as a proxy. This is an assumption that I make. Based on that, I'm estimating that 1.6 million people of first time parents since we're an app how target must have a some artful, the further funnels never down the funnel. And now we have 1.1 million people. Since we haven't Ivo now we need to look at that factor. Swell iPhone market share is 40% so that takes us to just under half a 1,000,000 people. That's a fraction off the total numbers of baby born from when we started on the top of the funnel. Finally off everyone who has iPhone, who am I targeting If I had been app, I assume that someone with some disposable income So I'm talking someone with household income. Ah, 50 k plus, since this is just this 46% of the household So now we have a potential use of base off 200,000 people. This is how I assumed how many potential uses say are for the iPhone app for new parents.
8. Market size Revenue estimation: Now comes the question. How much is that worth? At the end of the day, we're in the business off making money. Knowing that there may be 200,000 users for the app for new parents isn't enough. We need to know how much is that worth in actual dollar? Well, the simple math if we started with how many baby is born ish year and work through our funneled down to the potential number of users. And we'll figure out that there is 200,000 potential users that may download our app each year. And if we charge a dollar 99 40 chopped down low, your market size is estimated to be $421,000. This is your potential size of market. That's help you figure out what your annual revenue, maybe. And from here, you can definitely work out an ongoing model off your finances and your revenue stream and figure out how much issue business worth
9. Market size Project spreadsheet setup: So let's look at how this example layout. In the spreadsheet, you see the same structure, total market served, market addressable market target market. And you see that I lay out each assumption very clearly, and I color coded where my assumptions are. So if it ever changes, I use formulas to flow everything through so that it just makes a special, easy to maintain. Even if assumption changes some of my assumptions. I actually formalist as you see here. It's actually because this referencing some additional background information in this case , I was referencing census data in order to help me figure out how many. How so, off three they are, which is my proxy off base on parents. How many would be first time parents assume household three means first kid. So that's how I am calculating it in 41% a calculated based on household three, divided by sum total off households were three plus member in my some total that I calculated I excluded house home with only two members because I figured they don't have kids at all. So those are the logic that I used to come up with 41% which is the proxy off? How many first time parents there are. So there are some formulas in there just to keep me saying to kill me. Figure out where the 41% comes came from because it didn't came from any specific data source. It came from my calculation, that idea. So I prefer to keep everything clear and useful Miller to link all my calculations so that I can always reference back where the 41% came from or where that this assumption came from . 70% came from Internet research, 40% came from Internet research. 46% household income again came from census data. So 46% here, 46% based on percentage off. How many people earning 50 K plus. So that's how everything relate to each other and how they're specious built. And I came up with find a lumber off target number of user 211,000 people. And then down here is where I calculated the revenue. I decided to pick Green because this is second assumptions, because I could charge 99 cents for the Abbas well, and that will change ultimately the potential revenue. But Let's go back to 1 99 and then it becomes funder $21,000 for a year. So this is how I used cocoa to help me for girl. Different assumptions I'm putting in. I use formulas where is necessary so that I can keep track of everything and try to just keep a clean spread She and so that I can always speak adjustment, and I will set the spreadsheet up once and then be able to adjust even if market dynamic changes.
10. Class wrap up: so that's the class. I hope you've enjoyed that I've enjoyed making it. I hope you were able to pick up a few tips and tricks that will build your business and your brand. If you enjoy the class, please leave a review. Your reviews will help others just from this class and help them learn some of the tips and tricks thou share class. Or if you have any suggestions on how to improve the class, please reach out to me as well. Feel free to reach out to me via Twitter. You see my handle on the screen and Gini scored chant. Love to interact with you on Twitter. I'll check on my website jean Chen dot com. That's where I maintain my block, where constantly share new tips, tricks and insights. On there, you'll find other ways to interact with me, including my emails or other social media Profile must well, so feel free to we shall directly to me with any questions, Suggestions, feedback Also on my website. This way you can sign the bombing newsletter, and the tips that I share on my block will be conveniently delivered to your inbox. Don't recollect. In addition, my newsletter subscribers first notice on any new classes, and they also get exclusive. Offers are not available in Wells. Stephanie signed up. Don't miss out. I hope to see your own.