market-sizing

name	market-sizing
description	Estimate the size of a market using top-down and bottom-up methods. Produces a TAM/SAM/SOM analysis with assumptions documented, sensitivity analysis, and business implications for go-to-market strategy.
argument-hint	["market or product category","geographic scope","target customer","pricing model"]
allowed-tools	Read, Write, Bash

Market Sizing

Market sizing answers the question: "Is this worth pursuing?" It produces a defensible estimate of the addressable opportunity, not a precise number. The goal is to understand order of magnitude, validate assumptions, and identify the key levers that make the opportunity larger or smaller.

Market Size Definitions

Term	Definition	Use it for
TAM — Total Addressable Market	Total global demand for the category if you had 100% market share	Validating the ceiling
SAM — Serviceable Addressable Market	The portion of TAM your product and GTM can realistically reach	Realistic opportunity
SOM — Serviceable Obtainable Market	The share of SAM you can capture in 3–5 years	Business plan input

Two Methods

Top-Down

Start with industry data (analyst reports, public company filings) and narrow to your segment.

TAM = [Total industry size from analyst report]
   × [Fraction that matches your category]
SAM = TAM × [Geographic scope] × [Customer segment match] × [Price point accessibility]
SOM = SAM × [Realistic market share in 3–5 years]

Sources: Gartner, IDC, Forrester, SEC filings, public company investor decks.

Bottom-Up

Build from customer unit economics upward.

TAM = [Number of potential buyers] × [Price per buyer per year]
SAM = [Buyers reachable with your GTM] × [Price per buyer per year]
SOM = [Buyers you can win in 3–5 years] × [Price per buyer per year]

Sources: LinkedIn company data, industry association statistics, your own sales data.

Use both methods and triangulate. If they differ by >5x, revisit your assumptions.

Process

1. Define the market precisely — what category? What customer? What geography? What price point?
2. Identify market proxies — what existing data sources give you population and spending data?
3. Top-down estimate — start with industry analyst market size; narrow to your segment.
4. Bottom-up estimate — count potential buyers × your pricing.
5. Triangulate — do both methods agree within 2–3x? If not, find the assumption causing the gap.
6. Document every assumption — each assumption should have a source or a clear rationale.
7. Run sensitivity analysis — how does the SOM change if your key assumption is 50% wrong?
8. Segment the opportunity — break down by geography, company size, or vertical.
9. Assess competitive density — how much of the SAM is already claimed by incumbents?
10. Write implications — what does this mean for pricing, GTM strategy, and fundraising narrative?

Output Format

# Market Sizing: [Product / Market Category]
**Date:** [YYYY-MM-DD]
**Author:** [Name]
**Scope:** [Category] — [Geography] — [Customer segment]
**Pricing model:** [$X per user per year / $X per company per year]

---

## Summary

**TAM:** $[X]B — Total global market for [category]
**SAM:** $[X]B — [Your target geography and segment]
**SOM:** $[X]M — [Realistic 5-year capture]

**Key conclusion:** [One sentence on whether the opportunity is large enough and what it implies for strategy]

---

## Method 1: Top-Down

### Step 1: Total industry size
**Source:** [Analyst report or public filing]
- [e.g., "Gartner estimates the global project management software market at $7.3B in 2024, growing at 13% CAGR"]
- Total industry: $7.3B

### Step 2: Narrow to your category
- Project management software that serves B2B SaaS teams: ~35% of total market
- Segment size: $7.3B × 35% = $2.6B

### Step 3: Narrow to your geography
- North America + Western Europe: ~65% of B2B SaaS spend
- SAM (top-down): $2.6B × 65% = $1.7B

**Top-down SAM estimate: ~$1.7B**

---

## Method 2: Bottom-Up

### Step 1: Count the buyers

**Target customer:** Product and engineering teams at B2B SaaS companies, 10–500 employees.

| Company size | # Companies (US + EU) | Source |
|-------------|----------------------|--------|
| 10–50 employees | ~180,000 | LinkedIn company data |
| 51–200 employees | ~52,000 | LinkedIn company data |
| 201–500 employees | ~18,000 | PitchBook / Crunchbase |
| **Total** | **~250,000 companies** | |

**Assumption:** 60% of these are B2B SaaS or technology companies = ~150,000 target companies.

### Step 2: Average revenue per account

| Segment | Team size | ACV estimate | Basis |
|---------|-----------|-------------|-------|
| 10–50 employees | 8 team seats | $120/seat/year = $960/year | Our current pricing |
| 51–200 employees | 25 team seats | $120/seat/year = $3,000/year | Our current pricing |
| 201–500 employees | 60 team seats | $100/seat/year = $6,000/year | Volume discount |

 ~$2,400/year across all segments



SAM = 150,000 companies × $2,400 average ACV = 

---



| Method | Estimate | Variance |
|--------|---------|---------|
| Top-down | $1.7B | — |
| Bottom-up | $360M | — |
|  |  | 5x range |

 The 5x gap between methods is explained by:
 The top-down figure includes all PM software (enterprise tools like Jira cost $80–200/user/year vs. our $120)
 Bottom-up may undercount total buyer universe (excludes non-SaaS tech companies)
 Enterprise segment (500+ employees) is excluded from bottom-up


 Add ~20,000 enterprise companies × $15,000 = $300M additional
 Revised bottom-up SAM: ~$660M

 SAM is likely in the $500M–$800M range. Use $650M as the base case.

---




 Year 1: Land 200 new accounts (current run rate: 12/month)
 Year 3: Grow to 1,500 accounts at $2,400 ACV = $3.6M ARR
 Year 5: Grow to 5,000 accounts at $2,600 ACV (expansion) = $13M ARR

| Year | Accounts | ACV | ARR | SOM % of SAM |
|------|---------|-----|-----|-------------|
| 1 | 400 | $2,000 | $0.8M | 0.1% |
| 3 | 1,500 | $2,400 | $3.6M | 0.6% |
| 5 | 5,000 | $2,600 | $13M | 2.0% |



---



What happens to 5-year SOM if key assumptions change?

| Assumption | Base case | Pessimistic (-50%) | Optimistic (+50%) |
|-----------|----------|-------------------|------------------|
| Total addressable buyers | 150,000 | 75,000 | 225,000 |
| Win rate | 3% | 1.5% | 4.5% |
| Average ACV | $2,400 | $1,800 | $3,200 |
| 5-year ARR | $13M | $5M | $28M |

 Win rate has the largest impact. Improving win rate from 3% to 5% (via better onboarding or a stronger enterprise tier) more than doubles the SOM.

---



| Segment | SAM | Current penetration | Priority |
|---------|-----|-------------------|---------|
| US SaaS companies, 50–200 employees | $180M | 0.8% | P1 |
| EU SaaS companies, 50–200 employees | $120M | 0.1% | P2 |
| US SaaS companies, 10–50 employees | $80M | 0.4% | P3 (high volume, low ACV) |
| Enterprise 500+ employees | $270M | 0% (not yet serving) | Future |

---



  — $650M SAM is sufficient to build a $100M+ ARR business without needing > 15% market share.

  — $270M of SAM is in enterprise (500+). We are currently not equipped to serve this segment. SSO, SOC 2, and enterprise contracts are required.

  — current win rate in contested deals is approximately 22%. Moving to 35% has more impact than expanding total buyer universe.

  — 0.1% penetration vs. 0.8% in the US, despite $120M SAM. Consider localized onboarding and EU data residency as unlock mechanisms.

  — 4 well-funded competitors serving the same SAM. Differentiation via self-serve enterprise features is the defensible wedge.

Sourcing Market Data

Situation	Source	Cost
Industry analyst report	Gartner Magic Quadrant, IDC MarketScape	Free summaries; paid full reports
Public company filings	SEC EDGAR (10-K annual reports) — search competitor filings for market size claims	Free
LinkedIn company counts	LinkedIn Sales Navigator company search by employee count + industry	Paid subscription
VC / startup market sizing	Pitchbook, Crunchbase — look at competitor funding rounds; decks often cite TAM	Paid
Bottoms-up proxies	Bureau of Labor Statistics (US), Eurostat (EU) for employer counts	Free
Survey data	Your own NPS surveys, trial signup data	Free if you have it

Common Mistakes

Mistake	Example	Fix
TAM = SAM	"The global software market is $600B — our TAM is $600B"	Narrow to your actual category and customer
Circular reasoning	"We want to reach $50M ARR, so our SOM is $50M"	Build SOM from win rate × addressable buyers
Ignoring competition	"100% of SAM is available to us"	Apply competitive intensity discount (30–70% of SAM is captured by incumbents)
False precision	"Our TAM is $3.847B"	Use ranges: "TAM is $3–4B"
Wrong time horizon	"We can capture 30% of TAM"	30% market share is extremely rare; 2–5% in 5 years is realistic

Rules

• Use two methods, then triangulate — a single method produces a number; two methods produce confidence.
• Document every assumption — a market size without assumptions is a guess.
• SAM, not TAM, drives strategy — TAM is for the pitch deck; SAM is for the business plan.
• Sensitivity analysis is mandatory — show how SOM changes if your biggest assumption is wrong.
• False precision undermines credibility — use ranges; do not claim precision you do not have.
• Competitive density reduces SOM — some SAM is already captured by incumbents; account for it.
• Win rate is the most controllable variable — focus improvement efforts on win rate, not market expansion.
• Segment before sizing — one large number is less useful than three smaller numbers by segment.
• Update annually — a 3-year-old market sizing analysis may miss new competitors or market shifts.
• Connect to fundraising or planning — always end with what the sizing implies for strategy.