Business plans help business owners and leaders identify their goals and think through the steps needed to accomplish those goals. A vital part of any business plan is the market research section, which describes the demand for the company’s product and the current competitors. The market research section should tell how large each market for the product is, providing readers with a sense of how much business the company could do. Determining market size is a necessary step in writing a business plan.

Identify Your Markets

Identify types of potential clients. Think about the features of your product, and to whom those features would be benefits. List traits that people who would be interested in your product might have in common. For example, a gym might appeal to both fit people and moderately overweight people.

Determine factors that might exclude customers. For example, a luxury item may be unavailable to lower income households, or a customer might not be willing to go more than 15 minutes out of his way to go to a gym.

Put the traits and limiters together. For example, single overweight men who make at least $25,000 a year.

Calculate Market Size

Find statistics, preferably surveys conducted by a professional or governmental organization, on the demographics of your service area.

Add up the total number of people who meet your limiters. For example, a gym looking for single overweight men who make at least $25,000 a year and who live within 15 minutes of the location could use Census block information to determine the number of single men living within a 15-minute radius.

Reduce the total number of people who meet your limiters by the traits you identified. Multiply the total number by the percent of the total population that have the traits you identified. For example, if 87 percent of the population makes more than $25,000, and 10,000 single men live within a 15-minute radius, then 8,700 of those men likely make more than $25,000 per year.

Repeat with each additional market segment. Identify the size of each segment in your business plan, and sum up the entire size of the market for your product.