The general rule is as follows:
1) Create a profile that identifies who your target customer is.
2) Estimate how many of those customers are in the region you are planning on targeting.
3) Estimate your demand rate. Is your product or service mission critical and every single target customer would need it or, is it a product or service that people would buy if they see it otherwise they would not go out of their way for it.
4) multiply step 2 and 3 above.
Estimating your market size is not an exact science and there are many business/sector specific variables to consider that would increase the accuracy of the analysis.
If you would like to talk about this further, do not hesitate to contact me.
There are a lot of methods, approaches on how to calculate the market sizing of a niche industry. The most common methods are top-bottom, bottom-up, comparable markets/replacement, new market approaches.
The critical step is to identify the key factors and logical tree of Your calculations and assumptions (e.g. for diapers market: a) # of babies consuming diapers in a given day b) # of diapers baby uses per day c) average # of days per year.
There are a lot of statistics and information sources to assess key factors.
Another way to estimate market size is to conduct own survey (for a targeted market and potential users) to get the answers to all questions and check Your assumptions.
