Market Sizing

Market sizing

We were asked to assess the market size by vendor, by revenue and by user number and inquire into the future growth of the market.

Any market sizing exercise starts with defining the market, so I will briefly cover that. The target customers are small and medium businesses, contractors, sole proprietorships who need to keep their books and do basic accounting calculations. They may or may not already be using some variant of specialised software, alternatively can be using Excel and manual accounting, or nothing. The online accounting software provides the users with the means to fulfil these needs. With IT deployment, any registered business with internet connection is a potential customer.

So this is the kind of market the online accounting applications are targeting.

Clear Books provided very detailed specifications as to what sort data will aid us in our estimation. As we feared the fact that the majority of companies were private limited impaired our ability to gain precise data, so the market sizing estimate is at most very rough. These requirements we found difficult to fulfil, as the first round of emails to vendors saw mostly negative responses. We have been by then accumulating piecemeal information on numbers from the blogs and news releases and interviews with the industry specialists.

The third step is typically the estimation itself. There are essentially two approaches to sizing the market: top-down and bottom up. I will show you how we used both to come up with a reasonable estimate.

First we looked top-down to estimate the potential users. Following from the market definition, the online accounting software product is universal: it is affordable, has reasonable and expanding functionality for a small business..

But before we go there, I would like tell you about the growth. The online software deployment, typically termed as SaaS, is a growth field of IT industry. The technology adoption has been slow until about...