1. Market Sizing Determine some measurable population that bounds the target segment(s) Assumption: What proportion of the population has the problem or situation, and values it enough to pay to solve it? Assumption: How often does the “situation” occur (within, say, a year)? Assumption: What will they pay for each occurrence? Additional Assumptions – –How fast is the population growing? –How fast are any of the rates changing? At this stage, rough estimates are good enough

2. Finding Data on the Population Use demographics: –Consumer or B2B? If consumer: within what demo/geographic groups are your mainline consumers concentrated? If business: within what industries and geographic areas are your mainstream customers concentrated? Secondary data – government sources are good enough www.census.gov

3. Rates: make assumptions You may get a reasonable rate assumption out of your early interviews? –E.g. “75% of ‘them’ have the problem we solve” You may have done a survey that gives you proportions and rates of occurrence

4. Making assumptions with minimal data You don’t have to be accurate – in many cases, order of magnitude is OK Be conservative Bound the upper and lower range limits Where you have critical uncertainty, note this for later data collection

5. Make assumptions based on rule of thumb – be conservative If you think “everyone” in the base population will buy the product, use.5 as your proportion If “most” or ¾, then use.25 If “some of them will buy it,” use.1,.05, or.01 based on your lack-of-confidence level

6. Estimating Price Tough to do because prices are so dynamic –Based on interaction between supply and demand –Unobserved demand is almost impossible to gauge: Could anyone have predicted the “Starbucks effect”? –Competition will drive down prices, often faster and farther than you anticipated Remember the purpose: find an average price to multiply times your number of customers, times the frequency of occurrence So, try to estimate a conservative, average price point, based on your interviews

7. Estimating price, continued What are the competitive substitutes and what are their current prices? Business product or service: –What do businesses currently pay to solve the problem you address? –Are you aiming to reduce this cost for them? Consumer product or service: –What do consumers in your market currently pay for the category? (note: this is broader than your original target segment) –Do they appear willing to pay more if you are offering substantially more value?

8. Trends What is usage linked to? What do experts say about the rate of increase of that link? –E.g. health care market related to aging of baby boomer generation Straight-line, using multiple years of historical data: assume a plateau effect when saturation is an issue –E.g. cell phone usage Hockey stick -- does “Tipping Point” help predict inflection point?

9. Market Size Example for Glycopyrrolate Product Number of perimenopausal women in U.S. –Ages 51-54: 9,049,000 Percentage that will use the product, based on survey –10% - 48%: avg.= 1,968,158 women Price paid, per year –Herbal substitutes = about $30/month So: 2 million X $360 = ~$700 million / year