How to Calculate Potential Market Size
Identify and quantify untapped market opportunities. Calculate expansion potential beyond your current market.
How the How to Calculate Potential Market Size works
Assess current market penetration, identify adjacent segments, geographic expansion opportunities, and new use cases. Calculate total growth runway.
Understanding potential market size reveals how much room you have to grow and guides expansion strategy.
How it works
Tutorial
Potential market size calculation identifies untapped growth opportunities beyond your current market. While standard market sizing answers “How big is the opportunity?” potential market sizing answers “How much room do we have to grow?” A company with $50 million revenue in a $200 million market faces different strategic choices than one with $50 million revenue in a $2 billion market-the latter has 10 times more growth potential.
Understanding potential market size prevents complacency and reveals opportunities. Your product might have reached 40% of your initial target segment, but adjacent segments, geographic expansion, and new use cases could represent 5 times larger potential markets. Calculating this potential systematically-segment by segment, geography by geography-creates data-driven growth plans instead of guessing.
The Basic Components
| Component | Description | Purpose |
|---|---|---|
| Current SAM | Today’s serviceable market | What you can reach now |
| Adjacent Segments | Related customer types | Near-term expansion |
| Geographic Expansion | New regions | International potential |
| New Use Cases | Additional applications | Product expansion |
Step-by-Step Example
Scenario:Analytics software with current SAM of $180M (US mid-market), considering enterprise, small business, and Canada expansion
Step 1: Current Market Position
| Metric | Value | Explanation |
|---|---|---|
| Current Target | US Mid-Market (500-2,500 employees) | Initial focus |
| Current SAM | $180M | Addressable today |
| Current Revenue | $12M | Actual sales |
| Market Share | 6.7% | $12M / $180M |
| Remaining Current Market | $168M | Room in current segment |
Step 2: Adjacent Segment Potential
| Segment | Companies | Avg Price | Adoption % | Potential |
|---|---|---|---|---|
| Enterprise (2,500+ employees) | 4,200 | $85,000/yr | 15% | $53.6M |
| Small Business (100-500) | 28,000 | $12,000/yr | 25% | $84.0M |
| Vertical (Healthcare) | Current × 1.3 | Premium | 20% | $36.0M |
| Adjacent Total | $173.6M | |||
Step 3: Geographic and Use Case Expansion
| Expansion Type | Basis | Potential |
|---|---|---|
| Current US Remaining | From Step 1 | $168.0M |
| Adjacent US Segments | From Step 2 | $173.6M |
| Canada | US × 0.35 (GDP ratio) | $63.0M |
| UK/EU (Phase 2) | US × 0.80 | $144.0M |
| New Use Case (Real-time) | 30% add premium module | $54.0M |
| Total Potential | All opportunities | $602.6M |
| Multiplier vs Current | $602.6M / $180M | 3.35x |
What This Means
Your analytics business currently addresses a $180 million market but has access to a $602.6 million total potential market-3.35 times larger when including adjacent segments, geographic expansion, and new use cases. With current revenue of $12 million, you’ve captured just 2% of total potential, suggesting massive growth potential. Even capturing 10% of total potential would mean $60 million revenue-5 times current size.
This prioritizes expansion strategy: the $173.6 million adjacent segment opportunity (enterprise + small business + vertical) is nearly as large as your current market, requiring no geographic expansion-just product packaging changes. Canada ($63M) offers easier international expansion than UK/EU ($144M) due to proximity and language. You could achieve $30-40 million revenue staying US-only by penetrating adjacent segments, or pursue $100 million+ with international expansion.
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