The Wanderers boss believes he has the smallest playing staff in Premier League history - three goalkeepers and 16 outfield players - and knows he has to reinforce in January.
However, he is also aware that on the budget he is likely to be given he cannot afford to gamble and so will be looking to buy players with Premier League experience.
"The fact our squad is now smaller is purely a result of being bottom of the league 12 months ago," he said.
"You don't have to be Sherlock Holmes, you only have to pick up a programme to see what we have got.
"There are 16 outfield players, three goalkeepers - it is obvious it is not strong enough.
"We have got some good players but we have got probably the smallest squad that there has ever been in the Premier League.
"You can have 129 professionals but you can only play 11 and if you haven't got that quality you won't get results.
"What we need are tried and tested players, people who know the Premier League, because we haven't the time to give them three or four months to settle in because if that happens the season is finished."
Megson (pictured) admits his side have been lucky in that injuries have not affected their season too much but with a busy festive schedule ahead that could easily change.
"We are okay at the moment as we are getting away with it," added Megson, whose side travel to Aston Villa on Saturday.
"The quality has improved but the size of the squad has gone down and it is something we have got to address.
"Over the course of the season we have been fortunate at times. When we have been unfortunate we lost Gary Cahill and Johan Elmander and went out of the Carling Cup to Northampton and picked up one point out of nine."
Last January, with Bolton struggling at the foot of the table, they lost leading scorer Nicolas Anelka after Chelsea came in with a £15million bid.
Megson used some of that money to bring in record signing Elmander in the summer and with the club now in a much better position - 10th - the manager is confident most of the activity will be arrivals and not departures.
He had a meeting with chairman Phil Gartside and other senior club officials today to discuss his transfer budget and potential targets.
But Megson knows the state of the current squad means a signing akin to that of Elmander is out of the question and he will not be demanding a transfer 'war chest'.
"Football clubs and businesses don't work like that. Everyone is pulling in the same direction," he said.
"Financially we will have to look at it and see what is the right thing to do.
"We have to try to judge what reality is. If you send your wife out for a dress the first question she asks is 'How much can I spend?'.
"The questions are what are we actually trying to achieve, where do we want to get to and have we got the resources to do it.
"But it is more difficult in January because people want to hang on to their players.
"Last year we had to cope with the loss of Nicolas and it was a huge blow to us but if anyone comes in for our players we will have to look at it."
One departure already confirmed is goalkeeper Ian Walker, who agreed a deal to cancel his contract.
The 37-year-old made just eight appearances - although none in the Premier League - having signed on a free transfer from Leicester in 2005.
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