Market-buildup method

Definition (1):

The market-buildup method requires recognizing all the potential or probable buyers in each market and making an estimation of their potential purchases. It produces accurate results if have a list of all potential buyers and a good estimate of what each will buy.

Definition (2):

The market-buildup method is a method of calculating an industrial market’s revenue potential by recognizing the number of probable purchasers in the market and each purchaser’s requirements. The source of these data can be published SIC coded data, initial research like surveys or questionnaires, or sales history. When the actual purchase data is not available the number of employees or annual revenue of a buyer can be used for estimating their purchase requirements; here, it is assumed that their requirements are identical to those of customers having a similar number of employees or revenues.

Under the market-buildup method, an income estimation is done by identifying all the probable purchasers in the market and assuming their probable future buy. It gives a business a reasonable idea regarding the way to approach the research and development, advertising methodology, and extension plans. This method is considered one of the crucial tools for business valuation.

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