sickn33 Market Sizing Analysis
Comprehensive market sizing methodologies for calculating Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) for startup opportunities.
Use this skill when
- Working on market sizing analysis tasks or workflows
- Needing guidance, best practices, or checklists for market sizing analysis
Do not use this skill when
- The task is unrelated to market sizing analysis
- You need a different domain or tool outside this scope
Instructions
- Clarify goals, constraints, and required inputs.
- Apply relevant best practices and validate outcomes.
- Provide actionable steps and verification.
- If detailed examples are required, open
resources/implementation-playbook.md.
Overview
Market sizing provides the foundation for startup strategy, fundraising, and business planning. Calculate market opportunity using three complementary methodologies: top-down (industry reports), bottom-up (customer segment calculations), and value theory (willingness to pay).
Core Concepts
The Three-Tier Market Framework
TAM (Total Addressable Market)
- Total revenue opportunity if achieving 100% market share
- Defines the universe of potential customers
- Used for long-term vision and market validation
- Example: All email marketing software revenue globally
SAM (Serviceable Available Market)
- Portion of TAM targetable with current product/service
- Accounts for geographic, segment, or capability constraints
- Represents realistic addressable opportunity
- Example: AI-powered email marketing for e-commerce in North America
SOM (Serviceable Obtainable Market)
- Realistic market share achievable in 3-5 years
- Accounts for competition, resources, and market dynamics
- Used for financial projections and fundraising
- Example: 2-5% of SAM based on competitive landscape
When to Use Each Methodology
Top-Down Analysis
- Use when established market research exists
- Best for mature, well-defined markets
- Validates market existence and growth
- Starts with industry reports and narrows down
Bottom-Up Analysis
- Use when targeting specific customer segments
- Best for new or niche markets
- Most credible for investors
- Builds from customer data and pricing
Value Theory
- Use when creating new market categories
- Best for disruptive innovations
- Estimates based on value creation
- Calculates willingness to pay for problem solution
Three-Methodology Framework
Methodology 1: Top-Down Analysis
Start with total market size and narrow to addressable segments.
Process:
- Identify total market category from research reports
- Apply geographic filters (target regions)
- Apply segment filters (target industries/customers)
- Calculate competitive positioning adjustments
Formula:
TAM = Total Market Category Size
SAM = TAM × Geographic % × Segment %
SOM = SAM × Realistic Capture Rate (2-5%)
When to use: Established markets with available research (e.g., SaaS, fintech, e-commerce)
Strengths: Quick, uses credible data, validates market existence
Limitations: May overestimate for new categories, less granular
Methodology 2: Bottom-Up Analysis
Build market size from customer segment calculations.
Process:
- Define target customer segments
- Estimate number of potential customers per segment
- Determine average revenue per customer
- Calculate realistic penetration rates
Formula:
TAM = Σ (Segment Size × Annual Revenue per Customer)
SAM = TAM × (Segments You Can Serve / Total Segments)
SOM = SAM × Realistic Penetration Rate (Year 3-5)
When to use: B2B, niche markets, specific customer segments
Strengths: Most credible for investors, granular, defensible
Limitations: Requires detailed customer research, time-intensive
Methodology 3: Value Theory
Calculate based on value created and willingness to pay.
Process:
- Identify problem being solved
- Quantify current cost of problem (time, money, inefficiency)
- Calculate value of solution (savings, gains, efficiency)
- Estimate willingness to pay (typically 10-30% of value)
- Multiply by addressable customer base
Formula:
Value per Customer = Problem Cost × % Solved by Solution
Price per Customer = Value × Willingness to Pay % (10-30%)
TAM = Total Potential Customers × Price per Customer
SAM = TAM × % Meeting Buy Criteria
SOM = SAM × Realistic Adoption Rate
When to use: New categories, disruptive innovations, unclear existing markets
Strengths: Shows value creation, works for new markets
Limitations: Requires assumptions, harder to validate
Step-by-Step Process
Step 1: Define the Market
Clearly specify what market is being measured.
Questions to answer:
- What problem is being solved?
- Who are the target customers?
- What's the product/service category?
- What's the geographic scope?
- What's the time horizon?
Example:
- Proble