Market Sizing
When to Use This Skill
Use this skill when you need to:
- Estimate Total Addressable Market (TAM), Serviceable Addressable Market (SAM), and Serviceable Obtainable Market (SOM)
- Prepare market size estimates for an investor pitch or business plan
- Evaluate a new market opportunity before entering
- Validate whether a business idea has sufficient market potential
DO NOT use this skill for competitive analysis, go-to-market strategy, or financial projections. This is for market size estimation specifically.
Core Principle
MARKET SIZING IS ABOUT DEFENDABLE ASSUMPTIONS, NOT PRECISE NUMBERS — SHOW YOUR MATH, CITE YOUR SOURCES, AND TRIANGULATE WITH MULTIPLE METHODS.
Phase 1: Brief
Required Inputs
| Input |
What to Ask |
Default |
| Product/service |
"What are you selling? Describe it in one sentence." |
Must be provided |
| Target customer |
"Who is your ideal buyer? (demographics, company size, industry)" |
Must be provided |
| Geography |
"What market? (US, North America, global, specific country)" |
United States |
| Pricing |
"What is your price point or expected annual revenue per customer?" |
Must be provided |
| Purpose |
"What is this for? (pitch deck, internal planning, go/no-go decision)" |
Pitch deck |
| Known data |
"Do you have any existing market research, competitor revenue data, or industry reports?" |
None — will research |
GATE: Confirm brief before proceeding.
Phase 2: Estimate
Dual Methodology
Always use BOTH approaches and compare:
Top-Down (TAM → SAM → SOM):
- Start with total industry revenue or total potential buyers
- Narrow by geography, segment, and product fit
- Apply realistic market share assumptions
Bottom-Up (Unit Economics → Scale):
- Start with your price per customer
- Multiply by the number of realistic customers you can reach
- Scale by year with growth assumptions
Definitions
- TAM: Total revenue if you captured 100% of the market globally
- SAM: The segment of TAM you can realistically serve (geography, segment, product fit)
- SOM: The portion of SAM you can realistically capture in 1-3 years
GATE: Present the preliminary estimates with assumptions and wait for feedback.
Phase 3: Build
Deliverables
1. Market Sizing Document
- TAM, SAM, SOM with dollar values
- Top-down and bottom-up calculations shown step by step
- All assumptions listed and sourced
- Confidence level for each estimate (high, medium, low)
2. Assumptions Table
| Assumption |
Value |
Source |
Confidence |
| Total US small businesses |
33.2 million |
SBA 2024 |
High |
| % that use AI tools |
15% |
Industry report |
Medium |
| Willingness to pay $X/year |
5% of addressable |
Comparable products |
Low |
3. Visual Market Map
- Concentric circles showing TAM → SAM → SOM
- Dollar values labeled at each level
- Key assumptions annotated
4. Sensitivity Analysis
- How the SOM changes with different assumptions (optimistic, base, conservative)
- Which assumptions have the biggest impact on the final number
Phase 4: Polish
Pitch-Ready Output
Format the market sizing for the intended audience:
- Investor pitch: One slide with concentric circles, big numbers, and 2-3 key assumptions
- Internal planning: Detailed document with full methodology
- Go/no-go decision: Summary table with risk assessment
Credibility Checklist
Example 1: B2B SaaS Tool for Freelancers (US market)
TAM: 73M freelancers globally x $200/year = $14.6B
SAM: 20M US freelancers in knowledge work x $200/year = $4B
SOM: 0.1% in Year 1 = 20,000 customers x $200 = $4M
Example 2: Local Service Business (city-level market)
TAM: 500,000 households in metro area x $500/year avg spend on service = $250M
SAM: 50,000 target-income households x $500 = $25M
SOM: 2% market share in Year 1 = 1,000 customers x $500 = $500K
Anti-Patterns
- "Trillion-dollar market" claims — if your TAM is the entire global economy, you have not narrowed enough. Be specific.
- Only top-down — top-down without bottom-up validation produces fantasy numbers. Always triangulate.
- Unsourced assumptions — "We assume 10% adoption" without justification is guessing. Cite comparable products or research.
- SOM equals SAM — claiming you will capture your entire serviceable market is not credible. Be realistic about market share.
- Static sizing — markets grow, shrink, and shift. Note the growth rate and direction.
Recovery
- No industry data available: Use proxy industries, comparable company revenues, or first-principles calculation from census/demographic data.
- Top-down and bottom-up estimates diverge wildly: Investigate which assumptions drive the gap. The truth is usually between the two.
- Market looks too small: Consider: is the market growing? Can you expand the product to adjacent segments? Is this a niche worth owning?
- Market looks too big: Narrow the SAM further. A $100B TAM with a realistic $500K SOM is a better story than an unrealistic $10B claim.
1---2name: market-sizing3description: Estimates TAM, SAM, and SOM with top-down and bottom-up methodologies, assumptions documentation, and presentation-ready outputs. Use for business plans or investor pitches.4---56# Market Sizing78## When to Use This Skill910Use this skill when you need to:11- Estimate Total Addressable Market (TAM), Serviceable Addressable Market (SAM), and Serviceable Obtainable Market (SOM)12- Prepare market size estimates for an investor pitch or business plan13- Evaluate a new market opportunity before entering14- Validate whether a business idea has sufficient market potential1516**DO NOT** use this skill for competitive analysis, go-to-market strategy, or financial projections. This is for market size estimation specifically.1718---1920## Core Principle2122MARKET SIZING IS ABOUT DEFENDABLE ASSUMPTIONS, NOT PRECISE NUMBERS — SHOW YOUR MATH, CITE YOUR SOURCES, AND TRIANGULATE WITH MULTIPLE METHODS.2324---2526## Phase 1: Brief2728### Required Inputs2930| Input | What to Ask | Default |31|-------|------------|---------|32| **Product/service** | "What are you selling? Describe it in one sentence." | Must be provided |33| **Target customer** | "Who is your ideal buyer? (demographics, company size, industry)" | Must be provided |34| **Geography** | "What market? (US, North America, global, specific country)" | United States |35| **Pricing** | "What is your price point or expected annual revenue per customer?" | Must be provided |36| **Purpose** | "What is this for? (pitch deck, internal planning, go/no-go decision)" | Pitch deck |37| **Known data** | "Do you have any existing market research, competitor revenue data, or industry reports?" | None — will research |3839**GATE: Confirm brief before proceeding.**4041---4243## Phase 2: Estimate4445### Dual Methodology4647Always use BOTH approaches and compare:4849**Top-Down (TAM → SAM → SOM):**501. Start with total industry revenue or total potential buyers512. Narrow by geography, segment, and product fit523. Apply realistic market share assumptions5354**Bottom-Up (Unit Economics → Scale):**551. Start with your price per customer562. Multiply by the number of realistic customers you can reach573. Scale by year with growth assumptions5859### Definitions6061- **TAM:** Total revenue if you captured 100% of the market globally62- **SAM:** The segment of TAM you can realistically serve (geography, segment, product fit)63- **SOM:** The portion of SAM you can realistically capture in 1-3 years6465**GATE: Present the preliminary estimates with assumptions and wait for feedback.**6667---6869## Phase 3: Build7071### Deliverables7273**1. Market Sizing Document**74- TAM, SAM, SOM with dollar values75- Top-down and bottom-up calculations shown step by step76- All assumptions listed and sourced77- Confidence level for each estimate (high, medium, low)7879**2. Assumptions Table**80| Assumption | Value | Source | Confidence |81|-----------|-------|--------|------------|82| Total US small businesses | 33.2 million | SBA 2024 | High |83| % that use AI tools | 15% | Industry report | Medium |84| Willingness to pay $X/year | 5% of addressable | Comparable products | Low |8586**3. Visual Market Map**87- Concentric circles showing TAM → SAM → SOM88- Dollar values labeled at each level89- Key assumptions annotated9091**4. Sensitivity Analysis**92- How the SOM changes with different assumptions (optimistic, base, conservative)93- Which assumptions have the biggest impact on the final number9495---9697## Phase 4: Polish9899### Pitch-Ready Output100101Format the market sizing for the intended audience:102- **Investor pitch:** One slide with concentric circles, big numbers, and 2-3 key assumptions103- **Internal planning:** Detailed document with full methodology104- **Go/no-go decision:** Summary table with risk assessment105106### Credibility Checklist107108- [ ] All assumptions sourced (government data, industry reports, comparable companies)109- [ ] Top-down and bottom-up estimates are within 2x of each other110- [ ] SOM is realistic (under 5% of SAM for most startups)111- [ ] No obviously inflated numbers designed to impress rather than inform112113---114115## Example 1: B2B SaaS Tool for Freelancers (US market)116117**TAM:** 73M freelancers globally x $200/year = $14.6B118**SAM:** 20M US freelancers in knowledge work x $200/year = $4B119**SOM:** 0.1% in Year 1 = 20,000 customers x $200 = $4M120121## Example 2: Local Service Business (city-level market)122123**TAM:** 500,000 households in metro area x $500/year avg spend on service = $250M124**SAM:** 50,000 target-income households x $500 = $25M125**SOM:** 2% market share in Year 1 = 1,000 customers x $500 = $500K126127---128129## Anti-Patterns130131- **"Trillion-dollar market" claims** — if your TAM is the entire global economy, you have not narrowed enough. Be specific.132- **Only top-down** — top-down without bottom-up validation produces fantasy numbers. Always triangulate.133- **Unsourced assumptions** — "We assume 10% adoption" without justification is guessing. Cite comparable products or research.134- **SOM equals SAM** — claiming you will capture your entire serviceable market is not credible. Be realistic about market share.135- **Static sizing** — markets grow, shrink, and shift. Note the growth rate and direction.136137---138139## Recovery140141- **No industry data available:** Use proxy industries, comparable company revenues, or first-principles calculation from census/demographic data.142- **Top-down and bottom-up estimates diverge wildly:** Investigate which assumptions drive the gap. The truth is usually between the two.143- **Market looks too small:** Consider: is the market growing? Can you expand the product to adjacent segments? Is this a niche worth owning?144- **Market looks too big:** Narrow the SAM further. A $100B TAM with a realistic $500K SOM is a better story than an unrealistic $10B claim.
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