Too many manufacturing businesses assume demand is waiting just because they’re ready to sell.
But it’s not about your capabilities—it’s about whether enough customers actually exist.
This article walks through how to do the math before you commit, so you avoid wasting time and money chasing markets that can’t grow.
It’s exciting to chase a new customer segment, product niche, or emerging trend—especially when it feels like a good strategic move. But one of the most common mistakes manufacturing businesses make is overestimating the size of the market they’re entering.
You don’t find out until it’s too late—after you’ve bought the tooling, hired a team, and launched marketing. The frustration builds because the work is there, but the growth isn’t. In most cases, it’s not you. The demand just doesn’t exist at the scale you need. But there’s a way to know ahead of time.
If You Can’t Win Big, Even a “Win” Is a Loss
Here’s a real challenge: manufacturers tend to see early interest and interpret that as a green light. A few promising calls, some small trial orders, maybe one anchor customer—then it’s go-time. You invest in equipment, dedicate floor space, assign team members. But a year later, you’re still doing small runs, waiting for bigger orders to come. What happened?
Let’s take a CNC shop that saw potential in manufacturing components for a niche line of electric agricultural vehicles. They landed one new customer and believed it would unlock a larger market. They put in $140,000 for new fixtures and equipment mods. After 9 months, they realized there were only 18 companies in the entire country building that class of vehicle—and most already had established supply chains. The shop got 100% of what was realistically available. Problem is, it just wasn’t enough to cover the investment.
When you chase a market that’s too small, it doesn’t matter how good you are, how fast you are, or how competitive your pricing is. There simply isn’t enough volume to sustain growth.
How to Run the Numbers Without Overcomplicating It
You don’t need a PhD in market research. You need basic numbers and honest thinking. Here’s how you start.
Step 1: Estimate how many companies buy what you plan to sell. If it’s a custom part, productized service, or even a specialized process, ask: how many companies use this today?
Step 2: Estimate how much each spends per year. Are they buying $25,000 worth of this annually? $250,000? Knowing the ballpark helps.
Step 3: Multiply those two numbers. That’s your Total Addressable Market (TAM).
Step 4: Adjust for what’s realistic. Of that TAM, how many are in your reachable area or a segment you can legally, practically, and logistically serve? That’s your Serviceable Market.
Step 5: Now get really honest. If you gave it your best shot, what percent of that serviceable market could you win in 1–3 years? That’s your real opportunity.
Say you’re thinking about manufacturing a specialized bracket system for mid-size solar panel installers. You find out there are 400 such companies in your region. On average, each spends about $20,000/year on these brackets. TAM is $8 million. But only 150 of those are within your shipping radius, and maybe 50 would even consider switching vendors. You believe you can win 10 of them. That’s $200,000 in revenue. Now you can ask: is it worth $80,000 of tooling and setup time to chase that $200,000?
Most businesses never run this math. They just chase “growth.”
Talk to the Market Before You Bet on It
This is simple but powerful: talk to 10 real potential customers before investing in a new market. Don’t guess what they want—ask them. What do they buy now? How often? From whom? What would it take for them to consider someone new?
If 7 out of 10 sound indifferent, vague, or say “we’re fine with our current supplier,” that tells you what you need to know. On the other hand, if they say things like, “Lead times are a killer,” or “I wish someone could make a more durable version,” now you’re onto something. That’s not market size math—it’s market hunger.
This isn’t about selling on those calls. It’s about listening. If they’re not enthusiastic now, they won’t be enthusiastic later.
When Passion Meets Data: Balancing Gut Feel with Market Reality
It’s easy to get excited about a product or market because it feels promising. Maybe you’ve invented something new or spotted a trendy industry shift. But passion alone can blindside you if the numbers don’t back it up. The best manufacturers balance enthusiasm with hard data. Use your instincts to spot opportunities—but then let market size and customer feedback guide your decisions.
Imagine a manufacturer passionate about biodegradable packaging. The vision is great, but the market they aimed for was too small and highly competitive. They almost went all-in before realizing that the biggest buyers were locked into multi-year contracts with large incumbents. Instead, by digging deeper, they found a slightly different vertical—small food producers craving sustainable solutions—where demand was growing and barriers were lower. The pivot saved time and investment.
Don’t Overlook Your Capacity and Strengths When Choosing Markets
Even if the math looks promising, not every market is a good fit. Your team’s skills, your machinery, your sales network—they all matter. If you try to serve a market requiring complex certifications, specialized logistics, or a global footprint you don’t have, you’re setting yourself up for frustration.
Think of market entry like a handshake. Both sides need to fit. Don’t chase shiny markets that demand resources or expertise you don’t possess yet. Instead, choose where you can play to your strengths, build on existing relationships, and leverage your core capabilities.
Building a Flexible Roadmap for Market Expansion
No manufacturer should put all their eggs in one new market basket. Use the sizing and research process to build a portfolio of options with varying risk levels. Start with smaller markets that are easier to enter and can generate steady cash flow. Use those wins as proof points and cash to fund bigger, longer shots.
This approach also means you can adjust faster. If one market isn’t responding, you pivot without massive sunk costs. It’s a practical way to grow deliberately, instead of hoping for a big break.
Avoid Markets Where the Ceiling Is Already Too Low
There are four signs you’re looking at a dead-end market:
- There are only a few dozen customers—and most are locked into long-term supplier contracts
- You can only access a sliver of the market due to location, regulations, or capacity
- You’d need hundreds of micro-customers just to break even
- Even if you win the entire market, it barely moves the needle for your business
Here’s what’s dangerous: you might be able to win 100% of a market and still lose. That’s not growth. That’s just spinning your wheels somewhere new.
A Better Strategy: Stack Market Size + Willing Buyers + Easy Entry
Instead of asking “Is this market hot?” try asking:
- Is it big enough to matter?
- Are people already frustrated with current options?
- Can they test me without jumping through hoops?
That combination—size, dissatisfaction, and ease of entry—is what makes a new market worth it. You want early traction that proves people are not just willing but ready to work with you.
One powder coating business did this perfectly. Before launching a new high-durability outdoor finish, they called 20 metal furniture manufacturers. Half said they were having issues with flaking and color fading. The shop offered to test-coat a few sample units. Five took the offer. Three became regular customers. All that before they spent a dollar on new coating lines. That’s what smart market entry looks like.
3 Clear Takeaways You Can Act on Today
1. Always do a simple market math check before jumping in
List how many customers exist, how much they spend, and what percent you can reasonably win. If the result feels small, it is.
2. Have 10 real conversations before you commit
Call actual prospects and ask open-ended questions. Look for pain, not politeness. If they’re not leaning in, step back.
3. Know what happens if you win 100% of the market
If total domination still doesn’t make a big difference to your business, find a better target before you waste time.
Thinking of entering a new segment? Don’t fall for surface excitement. Do the math. Talk to the market. And make sure your next move has real room to grow.
Top 5 FAQs About Sizing and Entering Manufacturing Markets
1. How do I find accurate data on potential customers in a niche market?
Start with industry associations, trade shows, business directories, and public filings. Talk to suppliers, distributors, or consultants who serve the industry—they often have good insights. Online tools like LinkedIn and industry reports can help too.
2. What if my product is completely new with no obvious competitors?
Look for adjacent markets or substitute products customers currently use. Estimate how much they spend on alternatives, and consider if your offering solves pain points better or more cost-effectively. Customer interviews become even more critical here.
3. How much time should I spend validating market size before investing?
It depends on your resources, but generally, investing a few weeks on research and conversations can save months or years of wasted effort. The more you can test small before scaling, the better.
4. Can I rely on just one big customer to justify entering a market?
Relying on a single customer is risky. Markets change, budgets get cut, or contracts end. Look for multiple customers or a broad enough base to spread risk.
5. What if the market size is small but highly profitable?
Profit margins matter. A smaller market with high margins might be a great fit if it supports your strategic goals and cash flow needs. Just be clear on limits—growth may be capped.
If you’re thinking about launching into a new market, don’t let excitement rush your decisions. Use simple market math, have honest conversations, and assess your fit carefully. This isn’t about avoiding risk—it’s about making smarter bets that actually pay off. Take these steps now, and you’ll build growth paths that feel as solid as the products you make. Ready to rethink your next market move? Start by mapping your true opportunity today—and turn that insight into action.