The tankless heater should have a map in the specs divided into zones by average water temperature. There'll then be a table that references the zones and what size you need for what you expect to heat at the same time.

You should spend some time reading the literature of tankless heaters - the child post below explains it. Tankess heaters can only raise temp at certain flows. So, if your incoming water is ~55 degrees, it might be able to heat to 110 degrees and flow 6.6 GPH - basically one shower. In that scenario if someone turned on the hot water for.. say... dishes, the tankless can't keep up with demand and the overall output will be colder. Probably not cold but it might not be what you wanted.

The more expensive you go, the more the tankeless can do concurrently, but the more sacrifices you'll make: they'll be physically larger, they might require a bigger gas line, etc.

That’s why we installed a tankless unit, it freed up an entire utility closet because we were able to tuck it in to a pretty small space while still respecting the required clearances. The only downside we’ve had was initial cost, and the yearly flushing process, which really isn’t bad if you install the correct valves from the beginning. Takes about 30 min. a year, which is worth it for endless hot water. Our gas bill has also been lower too.

One thing to consider also is that tankless water heaters need a considerable amount of space around it because it needs adequate air flow. So if your water heater is in a closet, it might not work anyway.

I'm assuming they're referring to hardiness zones