Why Market Sizing
An Introduction to Back of the Envelope
One of the most valuable skills in the world is being able to size a market. It’s useful for investing, building a business, making strategic decisions, and more.
But there’s really no crash course in market sizing. So, this newsletter will be my attempt to create one via a variety of “case studies.” I’ll try to pick different businesses and industries and assess market prospects from both short- and long-term perspectives (although I’m inclined to focus more on the latter).
Most of the math will be back of the envelope.
In other words, most of the calculations will be somewhat rough, and that’s ok. It’s nearly impossible to size a market exactly, but correctly estimating the directionality and magnitude of a market can still be incredibly useful.
There are many ways to size a market (bottom-up estimates, top-down analysis, or via comparison to existing markets, to name a few). I’ll try to use a few methods in each post to triangulate accuracy and cross-check assumptions.
It can also be difficult to find data - and often even harder to determine which data is worth using. My approach will be to stick with the simplest, cleanest data and work from there. The idea is that anyone should be able to size a market, and to do so with broadly accessible information (i.e. not hidden behind expensive paywalls).
If this sounds interesting, make sure to click that subscribe button. It’s free, and you’ll get to join me on this exciting journey!
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A necessary note: the content in this newsletter is not, and will never be, investment advice.