market-sizing

name	market-sizing
description	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.
allowed-tools	Read Write Glob
metadata	{"author":"matthewhitcham","version":"1.0"}

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.

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Core Principle

MARKET SIZING IS ABOUT DEFENDABLE ASSUMPTIONS, NOT PRECISE NUMBERS — SHOW YOUR MATH, CITE YOUR SOURCES, AND TRIANGULATE WITH MULTIPLE METHODS.

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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.

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Phase 2: Estimate

Dual Methodology

Always use BOTH approaches and compare:

Top-Down (TAM → SAM → SOM):

1. Start with total industry revenue or total potential buyers
2. Narrow by geography, segment, and product fit
3. Apply realistic market share assumptions

Bottom-Up (Unit Economics → Scale):

1. Start with your price per customer
2. Multiply by the number of realistic customers you can reach
3. 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.

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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

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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

• All assumptions sourced (government data, industry reports, comparable companies)
• Top-down and bottom-up estimates are within 2x of each other
• SOM is realistic (under 5% of SAM for most startups)
• No obviously inflated numbers designed to impress rather than inform

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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

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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.

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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.