B2B Market Sizing: A Quick & Easy Way to Estimate Number of Potential Users

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Note: This post is part of a series on 8 B2B Market Sizing Approaches to Quickly Assess Market Opportunity

Top-Down-Market-SizingMany B2B products and services are sold at the user level. Consequently, the best ways to estimate a market size is to get a sense of the total number of potential users who could buy the product or service and then apply the user-level pricing to the employment count. One of the quickest ways to do this is to pull employment statistics from the U.S. Bureau of Labor Statistics (BLS), as it tracks U.S. workforce statistics by title/role and industry.

This post will help you understand when to use this top-down sizing approach, and will walk you through the process with a step-by-step example below.

When is This Approach Useful?

This approach works well with products and services that have multiple users in an organization and used by a concentrated type of buyers like accountants or retail sales associates. However, the occupational list does not track all titles in all companies, rather it tracks roles. So sometimes you cannot find an exact match. This same issue exists with the industry classifications.

Market Definition Restrictions of the Approach

The difficulty in using this approach is getting a clear definition of who can use your product or services and then figuring out how to apply this definition using the occupation and industry categories tracked in the BLS.

This approach also only works with U.S.-focused businesses and is limited to the occupation and industry categories defined by the BLS.

A Step-by-Step Guide to BLS Market Sizing

  • Step 1: Develop a clear target user definition.
  • Step 2: Determine if the market is restricted to a subset of industries.
  • Step 3: Go to the BLS employment tables by occupation. Find the occupation category/categories that house your potential buyers/users.
  • Step 4: Now find the relevant industries and pull the employment counts. The data is hierarchical, so be careful not to aggregate summary and detailed level counts.
  • Step 5: Now apply the price per user per month to the employment count. If you have multiple price points, then you will have to figure out how to apply your pricing segmentation model to the BLS data. This is easy if it is by industry and/or role, but is more tricky if it is by size, usage, or some other factor.

Example of How to Apply this Model in Action

  • Example Market Size Question: What is the U.S. market size for a real estate sales associate enablement tool that costs $3 per user per month? And how will this market change by 2022?
  • Question 1: Who are your target users? Real Estate Sales Associates (Non-Brokers). This group is tracked in the BLS under occupation code: 41-9022.
  • Question 2: Is this a horizontal solution or is focused on a subset of industries? No, it is a residential only real estate tool, but can be used in leasing or sales. This is identified as code: 531000 in the BLS data.

employment by industry chart

Question 3: How many retail sales associates are there in the U.S.? 139,100 real estate sales associates.

So the market size today is: 139,100 real estate sales associates in the U.S. * 12 Months = $1,669,200

What do we project the market size will be in 2022? 1,669,200 * (1 + 12% Forecasted Percentage Change) = $1,869,504

Free Tool to Help You Size Your Market Using the BLS Approach

Russell Conard at Ornicept put together an Excel-based tool for helping you size a market using the BLS data. I recommend checking it out if you are looking at sizing a market with users across more than 1 occupation and looking to document how you got at the estimate. It also provides a visualization of the market size to share with you team or prospective investors.

Alternative Market Sizing Approaches to Consider

I also recommend evaluating the other approaches that you could use to get at this question and making sure you are using the most logical approach to get at your market sizing question.

Last year, I put together a presentation to train the investment team at OpenView on how to think about B2B market sizing.  I think this is a great source to get you started on how to think about sizing your market. The deck walks you through seven different approaches to quickly sizing a B2B market and provides step by step examples. Check it out below:

 

Another good starting point is my post “The Science of B2B Market Sizing,” which provides tips on how to use the right applications, create a clear market definition, and identify the best market opportunities for your company.





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Photo by: Nicolai Berntsen

Marketing Manager, Pricing Strategy