Market Size: How to Calculate and Present It Credibly
Market size tells investors how big the opportunity is. Present it credibly using the TAM-SAM-SOM framework with realistic assumptions.
The TAM-SAM-SOM Framework
TAM (Total Addressable Market)
The entire market opportunity if you captured 100% market share
Example: "All restaurants globally spend $50B annually on management software"
Calculate: # of potential customers × average spend per customer
Calculate: # of potential customers × average spend per customer
SAM (Serviceable Addressable Market)
The portion you can realistically reach with your business model
Example: "Independent restaurants in North America with 5+ locations: $8B"
Filter by: Geography, customer segment, business model fit
Filter by: Geography, customer segment, business model fit
SOM (Serviceable Obtainable Market)
What you can realistically capture in the near term (3-5 years)
Example: "We can capture 2% of our SAM in 5 years = $160M revenue opportunity"
Based on: Go-to-market strategy, competition, execution capability
Based on: Go-to-market strategy, competition, execution capability
Market Sizing Methods
Top-Down Approach
Start with industry reports and analyst data
- • Use industry research (Gartner, IDC, etc.)
- • Apply filters for your specific segment
- • Good for established markets
Bottom-Up Approach
Build from customer data and direct research
- • Count potential customers directly
- • Estimate willingness to pay
- • Better for new/niche markets