How to calculate a market's potential

Expanding into new markets can unlock major growth, but it shouldn’t rely on guesswork. A product that succeeds at home might struggle elsewhere due to differences in consumer demand, competitive intensity, or spending power. Market potential varies significantly by region, and what looks promising on the surface could fall flat without proper analysis.

That’s why calculating market potential is a critical first step. It’s not just about estimating size—it’s about understanding relevance, accessibility, and the true drivers of demand. This includes identifying total addressable market (TAM), narrowing to serviceable market segments, and assessing the share you could realistically capture.

With no historical benchmarks to guide assumptions, projecting sales in unfamiliar markets becomes complex. Costs, behaviors, and local conditions introduce uncertainty. To move forward with confidence, brands need a model rooted in data, local insight, and strategic evaluation—not assumptions.

Done well, market potential analysis helps brands prioritize regions, plan realistic entry strategies, and allocate resources where the return is most likely to materialize.

What’s the market really worth?

Before entering a new region, brands need a clear view of the local commercial landscape. This starts with a market sizing analysis that looks at current and projected market size, demand trends, growth rate, profitability, cost structures, distribution networks, and the critical factors for success.

A surface-level scan of this data might be enough to identify a shortlist of viable territories. But when the decision to invest is on the line, a more rigorous assessment is essential. This is where a deeper market understanding analysis becomes critical, helping you evaluate viability with data rather than gut feel.

Many brands then apply a total addressable market (TAM) framework to quantify opportunity. TAM reflects the full revenue potential if your product or service were adopted across the entire market. From there, the focus narrows to your serviceable available market (SAM)—the portion of TAM your offer is relevant to—and then your serviceable obtainable market (SOM), or the share your brand could realistically capture based on its current strengths and the local competitive landscape.

Using this structured approach gives clarity not just on market size, but on how well the opportunity fits your brand’s capabilities and strategic direction.

How do you estimate SOM in new markets?

Reaching a realistic serviceable obtainable market (SOM) figure is rarely straightforward—especially in markets where your brand is untested. Even in regions where you’re already established, calculating SOM involves educated assumptions. When entering unfamiliar territory, the margin of error increases significantly.

Still, businesses with experience in market expansion can often draw from historical benchmarks and refine their assumptions through local research. Consumer behavior, purchasing power, and category maturity all play a role in shaping what’s realistically achievable.

In some cases, reliable data may be available from industry associations or government agencies. But in less developed categories—or markets where the product class is still nascent—data may be sparse or inconsistent.

And even when baseline demand is visible, estimating market share introduces further uncertainty. You may have a handle on acquisition costs, infrastructure, or marketing spend in familiar regions, but those assumptions may not translate well. Entering a new market often means rebuilding your cost models from scratch.

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Why local insight matters more than spreadsheets

Market potential isn’t just a numbers game. To make informed decisions, you need insight from those with firsthand experience in your target market. There are two ways to gather this: benchmark against others who’ve entered similar markets, and speak directly with local partners.

Start by researching sales figures or expansion strategies from businesses comparable to yours. Even if they aren’t direct competitors, their market entry stories can uncover barriers, demand gaps, and the most effective go-to-market approaches.

You can also learn a lot by speaking with those businesses. Ask what surprised them. What mistakes were made? What should they have known earlier? Their experiences can reshape your assumptions, especially when it comes to peak sales periods, cultural business practices, and regulatory timelines.

But nothing replaces the value of local expertise. Lawyers, accountants, logistics partners, and media buyers all have knowledge that can help you estimate demand, sidestep risk, and uncover hidden costs. If you plan to enter through a distributor, licensee, or franchise model, their commercial instincts will help you judge the scale of the opportunity.

Ultimately, rigorous market research is what brings it all together. Combining hard data on spend and category growth with local behavior and expectations gives you a sharper, more realistic view of what success might look like.

Look beyond categories – focus on behavior

When projecting market potential, it’s easy to get caught up in product categories and competitor comparisons. But a more powerful lens is behavior. How do people use your product? What needs does it fulfill? What mindset drives purchase?

Instead of just asking whether a new market has similar brands, ask whether it has similar consumers. Identify the core behaviors and motivators behind your success in current markets. Are your best customers driven by convenience, health, status, or sustainability? Do they share habits, routines, or values that transcend geography?

Then look for those same patterns in your target market. If you can map behaviors rather than demographics, you’ll spot pockets of demand others may overlook.

This approach demands deeper consumer insight, ideally paired with strong market signals—things like local infrastructure, rising disposable income, or early brand awareness. But if the fundamentals are in place, behavioral analysis can provide the clearest path to relevance.

Know your real costs before you commit

Estimating sales and market share is only half the equation. The other half is cost. Market potential isn’t just about how much you can sell—it’s how much you can keep.

Brands often underestimate the hidden costs of international expansion. Even seasoned leaders get caught off guard. Beyond standard operating expenses, a new market adds a layer of complexity you won’t face at home. Costs to plan for include:

Shipping and logistics: Freight rates are volatile, and capacity constraints can limit exports. It’s often cheaper to ship to major exporters than the reverse.
Legal and compliance: From registering your business to ensuring proper labeling, contracts, and insurance, local legal frameworks can introduce unexpected hurdles.
Foreign taxes: Different jurisdictions mean different tax laws. Your headquarters’ domicile and market entry model will shape what you owe.
Translation: Everything from packaging to manuals, contracts to marketing materials, may need professional localization.
HR and staffing: Even lean entries require boots on the ground—local staff to manage partners, oversee setup, or represent the brand.
Travel: Visits to partners, warehouses, or new hires will add up quickly.

Each of these costs can eat into margins and delay profitability. A true market potential assessment must account for them.

Map your competitive terrain

Rarely will you find a market with no competition. To make a realistic assessment of your opportunity, you need to understand who’s already there and how strong they are.

Start by identifying competitors who serve your ideal customer—even if their product isn’t identical. Then dig deeper:

Product scope: What’s in their range? How easily can they pivot?
Positioning: What messages are they using? Through which channels?
Cost base: Are they operating lean or with scale advantages you’ll struggle to match?
Market share and fragmentation: How crowded is the space? Is it ripe for consolidation or dominated by a few big players?
Structural weaknesses: Do they rely heavily on licensing or outsourcing? Could that be a vulnerability you exploit?

Competitor analysis helps pressure-test your assumptions and sharpen your go-to-market approach. It also reveals whether your edge lies in pricing, innovation, branding—or whether more groundwork is needed before launch.

Turn insights into action with a smarter market entry strategy

Expanding into a new market is never simple, especially without prior experience. But with the right mix of data, local knowledge, and consumer insight, brands can make more confident, informed decisions.

At Kadence, we help businesses go beyond guesswork. Our approach blends primary and secondary research with on-the-ground expertise in key regions, delivering a well-rounded view of your market potential and the smartest path to enter.

The key steps we guide clients through:

Understand demographic and economic drivers that define your total addressable market.
Explore behavioral and cultural dynamics that influence market demand and product relevance.
Estimate TAM, SAM, and SOM based on real-world activity and available demand.
Run consumer research to validate interest, preferences, and purchase intent.
Analyze competitors to understand potential share and barriers to entry.
Assess true costs and risks to calculate profit potential—not just topline revenue.

Don’t rely on assumptions. Let data and insight shape your strategy.
Explore our market entry services, read our expert guide to market entry, or get in touch with our team to discuss your project.