Evaluating your potential market is not a simple theoretical formality for completing a business plan. This is the litmus test. Too many project leaders fall in love with their idea, design a technically impeccable product, then encounter the worst-case scenario: radio silence from customers.
Before launching production, incurring marketing expenses or resigning, a vital question must be asked: Are there enough people willing to pay for your solution?
To answer it precisely, here is the step-by-step method, structured and realistic, to evaluate your potential market without deluding yourself.
1. Define your TAM, SAM and SOM: the decision pyramid
To quantify a market, analysts use three essential acronyms. Think of them as a spyglass that gradually zooms in on your actual target.
- TAM (Total Addressable Market) – The total addressable market: This is the overall demand for your product category, without any geographic limits or competitive constraints. This is the size of the entire aquarium.
- SAT (Serviceable Addressable Market) – The accessible market: This is the portion of the TAM that you can really target given your business model, your geographic scope or your linguistic constraints.
- SOM (Serviceable Obtainable Market) – The reachable target market: The reality on the ground. This is the share of SAM that you plan to capture in the short or medium term, taking into account your financial resources, your sales force and the existing competition.
A concrete example:
If you are launching a SaaS payroll application intended for French-speaking SMEs:
- TAM: The entire global payroll software market.
- SAT : SMEs located in France, Belgium and Switzerland.
- SOM: The 500 French-speaking SMEs that you aim to acquire within 24 months thanks to your marketing budget.
The journalist’s advice: Investors prefer a realistic and well-argued SOM to a gigantic TAM thrown around without nuance. Promising to capture “1% of the Chinese market” has never constituted a commercial strategy.
2. Combine Top-Down and Bottom-Up approaches
To estimate the potential turnover of your market, two calculation methods must be combined.
The Top-Down Approach
It is based on macroeconomic studies and sectoral data (INSEE statistics, studies from firms such as Gartner, Xerfi, Statista or union summaries). You start from the global market and you reduce the scope by applying inheritance filters.
Main risk: Overestimate your potential based on overly generic numbers that don’t reflect the micro-uses of your niche.
The Bottom-Up approach
Much more pragmatic, it starts from your operational reality. You calculate the market value by multiplying the potential number of identifiable customers by the forecast annual average basket.
$$text{Market size (Bottom-Up)} = text{Number of target customers} times text{Average price per year}$$
Why cross the two?
If the Top-Down approach gives you a market worth 50 million euros, but your Bottom-Up calculation caps out at 500,000 euros with your current distribution capabilities, you immediately identify where the bottleneck is.
3. Analyze demand: qualitative and quantitative study
Industry reports don’t buy your products; human beings (or businesses), yes. We must therefore validate the need on the ground.
The quantitative study (Validate the volumes)
The objective is to measure an overall trend and obtain representative statistics.
- Online surveys: Disseminated to a targeted sample (via professional networks or specialized panels).
- Google Trends and search volumes: Analyze the evolution of key queries associated with your problem over the last 3 to 5 years. Are people actively looking for solutions?
- Purchasing intention test (Landing Page): Create a simple web page presenting your added value with an action button (“Pre-order” or “Join the waitlist”). Measure the conversion rate even before developing the product.
Qualitative study (Understanding motivations)
Nothing replaces the individual interview (15 to 30 minutes) with around twenty target prospects.
- Don’t ask: “Would you like this product?” » (People say yes out of politeness).
- Instead, ask: “How do you solve this problem today?” How much does it cost you? When was the last time this caused you real harm? »
4. Map the competitive ecosystem
A market without competitors is not necessarily a boon: it is often a sign that there is no market at all.
To measure the space available for your offer, identify three categories of players:
┌─────────────────────────────────────────────────────────────────┐
│ VOTRE ÉCOSYSTÈME │
├─────────────────────────────────────────────────────────────────┤
│ 1. Concurrents Directs │ Offrent la même solution au même │
│ │ besoin. │
├──────────────────────────┼──────────────────────────────────────┤
│ 2. Concurrents Indirects │ Résolvent le même problème avec un │
│ │ autre produit/technologie. │
├──────────────────────────┼──────────────────────────────────────┤
│ 3. L'Inertie (Statut Quo)│ La décision d'utiliser des méthodes │
│ │ manuelles ou d'attendre. │
└─────────────────────────────────────────────────────────────────┘
The competitive analysis grid to build:
- Offer and Pricing: What is the dominant pricing model?
- Strengths and Weaknesses: Read negative reviews on Google, Trustpilot or forums. Your competitors’ dissatisfactions constitute your product roadmap.
- Share of voice: What is the digital and media footprint of historical players?
5. Measure market dynamics and barriers
Today’s market will not be tomorrow’s. Your evaluation must integrate its kinetics:
- Market growing, stagnating or declining? Entering a fast-growing market (e.g.: AI tools, energy transition) allows you to capture the overall increase. Entering a mature market requires taking share from established players.
- Barriers to entry: What are the technical, regulatory or financial obstacles? ISO certification or strict GDPR compliance can lengthen your time to market and increase your cost of entry.
- The sales cycle: In B2B, signing a contract can take between 3 and 12 months. In B2C, purchasing can be impulsive. This metric determines the cash flow necessary to hold up to the balance point.
Summary checklist for your market research
| Stage | Key action | Validation Livel |
| 1. Framing | Calculate TAM, SAM and SOM | Credible and sourced figures |
| 2. Modeling | Cross-reference Top-Down & Bottom-Up data | Difference less than 30% between the 2 |
| 3. Land | Conduct 15-20 qualitative interviews | Acute problem confirmed |
| 4. Validation | Test intent (Landing page / Pre-orders) | Verified conversion rate |
| 5. Competition | Analyze negative opinions from stakeholders | Clear differentiation |
From potential market to real market
Evaluating your potential market is an exercise in humility and lucidity. Statistical figures give direction, but only early confrontation with the field allows you to validate your hypotheses.
Don’t try to prove that you are right at all costs. Try to understand the reality of the market as quickly as possible: this is the surest way to adjust your offer before it is too late.
