market-sizing

Market Sizing

For unfamiliar placeholders or connected tools, see CONNECTORS.md.

TAM (Total Addressable Market), SAM (Serviceable Available Market), SOM (Serviceable Obtainable Market) analysis framework. Cross-validates using 3 methodologies (Top-down, Bottom-up, Value Theory) to present compelling market opportunity to investors.

How It Works

┌─────────────────────────────────────────────────────────────────┐
│                    MARKET SIZING FRAMEWORK                      │
├─────────────────────────────────────────────────────────────────┤
│  Core Features (Standalone)                                      │
│  ✓ Calculate TAM/SAM/SOM using 3 methodologies                  │
│  ✓ Web search for industry reports and market data              │
│  ✓ Cross-validate with triangulation for confidence             │
│  ✓ Create investor-ready visual summary & assumptions doc       │
├─────────────────────────────────────────────────────────────────┤
│  Enhanced Mode (with tool connections)                           │
│  + ~~knowledge base: Refine Bottom-up with internal customer     │
│                      data                                        │
│  + ~~spreadsheet: Model market size scenarios                    │
│  + ~~data enrichment: Validate against competitor data           │
└─────────────────────────────────────────────────────────────────┘

Getting Started

1. Basic Analysis: "Analyze TAM/SAM/SOM for Korea B2B SaaS CRM"
2. Specific Segment: "What's the market size for SMB accounting SaaS?"
3. Investor Pitch: "Create a market sizing slide for Series A pitch"
4. Validate: "Verify our $5B TAM estimate"

TAM / SAM / SOM Definition

3-Tier Framework

┌──────────────────────────────────────────────────────┐
│                   TAM (Total)                        │
│  "Everyone with this problem"                        │
│  Example: Global CRM market $50B                     │
│  ┌───────────────────────────────────────────┐       │
│  │          SAM (Serviceable)                │       │
│  │  "People we can reach"                    │       │
│  │  Example: Korea SMB CRM $500M             │       │
│  │  ┌─────────────────────────────────┐      │       │
│  │  │    SOM (Obtainable)             │      │       │
│  │  │  "Realistic capture target"     │      │       │
│  │  │  Example: 3-year goal $15M (3%) │      │       │
│  │  └─────────────────────────────────┘      │       │
│  └───────────────────────────────────────────┘       │
└──────────────────────────────────────────────────────┘

Each Tier Defined

Tier	Definition	Key Question	Investor Focus
TAM	Total addressable market	"If all potential customers used us?"	Is market big enough? ($1B+ preferred)
SAM	Serviceable available market	"Who can our business model reach?"	Is target realistic?
SOM	Serviceable obtainable market	"How much can we realistically capture?"	Is execution feasible?

Typical Ratios

• SAM: 10-50% of TAM (geography, segment, channel constraints)
• SOM: 2-10% of SAM (3-5 year goal, competition considered)

Example (Global SaaS CRM):

• TAM: $50B (all enterprises worldwide)
• SAM: $5B (Korea + SMB + cloud-based)
• SOM: $150M (5-year 3% market share goal)

---

3 Methodologies

Methodology Comparison

Methodology	Approach	Advantages	Disadvantages	Best For
Top-down	Market → Segment	Fast, uses reports	Many assumptions, over-estimates	Mature market, initial estimates
Bottom-up	Unit economics → Aggregate	Accurate, realistic	Data-heavy, time-consuming	Validated Unit Economics
Value Theory	Customer value creation	Fits new markets, differentiates	Subjective, hard to prove	New categories, 10x products

Recommendation: Execute all 3, then cross-validate (Triangulation)

1. Top-down (Top to Bottom)

Process

Entire market size
    ↓ Region filter (example: Korea = 2% of global)
Korea market size
    ↓ Segment filter (example: SMB = 60%)
Target segment
    ↓ Adoption rate (example: cloud conversion = 40%)
SAM
    ↓ Market share target (example: 5% in 5 years)
SOM

Calculation Example (CRM SaaS)

1. TAM: Global CRM market = $50B (Gartner 2024)
2. Region Filter: Korea = 2% of global = $1B
3. Segment: SMB (10-500 employees) = 60% = $600M
4. Channel: Cloud-based = 70% = $420M (SAM)
5. Market Share: 5-year goal 5% = $21M (SOM)

Data Sources

• Global: Gartner, IDC, Forrester, Statista, Grand View Research
• Korea: Korean IT Industry Association (KAIT), KISA, Statistics Korea
• Free Alternative: Public company IR, industry association reports, CB Insights

Cautions

• Avoid Over-estimation: Conservative filter at each step
• Use Current Data: 2-3 year old reports, adjust for growth
• Confirm Definitions: "CRM" scope varies by report

2. Bottom-up (Bottom to Top)

Process

Unit economics
 (Revenue per customer)
    ↓ × Target customer count
Potential revenue
    ↓ × Realistic reach rate
SAM
    ↓ × Conversion rate
SOM

Calculation Example (Accounting SaaS for SMB)

Step 1: Target Customer Count

• Korea SMB (10-100 employees): 150,000 (Statistics Korea)
• Current accounting software users: 80% = 120,000
• Cloud conversion intent: 50% = 60,000 (TAM customers)

Step 2: Customer Revenue

• ARPA (Average Revenue Per Account): ₩300K/month
• Annual: ₩3.6M per customer

Step 3: TAM Calculation

• 60,000 × ₩3.6M = ₩216B (~$180M)

Step 4: SAM (Reachable)

• Sales team can cover: 30% = 18,000 customers
• SAM = 18,000 × ₩3.6M = ₩64.8B ($54M)

Step 5: SOM (5-year target)

• Target share: 5% = 900 customers
• SOM = 900 × ₩3.6M = ₩3.24B ($2.7M ARR)

Data Sources

• Customer Count: Statistics Korea, SME Office, industry associations
• ARPA: Competitor disclosures, beta customer data, pricing pages
• Conversion: Own funnel data, benchmarks (Seed: 1-3%, Series A: 5-10%)

Advantages

• Verifiable: Each step backed by data
• Connects to Execution: SOM reverse-calculates needed customers
• Investor Trust: Specific, credible narrative

3. Value Theory (Value-Based)

Process

Current solution cost
    ↓ - Our product cost
Savings (or added value)
    ↓ × Total customer count
TAM
    ↓ × Adoption target %
SOM

Calculation Example (AI Recruiting Platform)

Step 1: Current Cost

• Avg SMB recruiting cost: ₩5M per hire (20% agency fee)
• Avg hires/year: 5
• Annual recruiting cost: ₩25M/business

Step 2: Our Value

• Reduce agency fee 80%: -₩4M
• Save HR time 50%: -₩1.2M
• Reduce bad hires 30%: -₩1.5M
• Total savings: ₩7.5M/year

Our subscription: ₩1.2M/year

• Net savings: ₩6.3M/year
• ROI: 525%

Step 3: Willingness to Pay

• Customers pay 10-30% of savings: 30% = ₩1.9M
• Our price ₩1.2M is 63% of willingness → attractive

Step 4: TAM

• Target: 50,000 SMBs
• TAM = 50,000 × ₩1.2M = ₩600B (~$50M)

Step 5: SOM

• 5-year adoption: 10% (existing solution replacement)
• SOM = 5,000 customers × ₩1.2M = ₩300B ($25M ARR)

When to Use

• New Categories: No existing market data
• 10x Innovation: Revolutionary product
• B2B ROI: Clear cost savings narrative

Cautions

• Validate Assumptions: "80% savings" proven with beta customer data
• Consider Alternatives: Free/low-cost competing options
• Behavior Change: Value exists, but conversion may be slow

---

Cross-Validation (Triangulation)

Why It's Needed

• Top-down: Tends to over-estimate
• Bottom-up: Tends to under-estimate (conservative)
• Value Theory: Subjective, hard to prove

→ 3 results in similar range = high confidence

Validation Process

1. Run 3 Methodologies Independently

   • Don't let one result influence another

2. Compare Results

   | Methodology | TAM | SAM | SOM (5-year) |
   |--------|-----|-----|-----------|
   | Top-down | $200M | $50M | $5M |
   | Bottom-up | $180M | $45M | $3M |
   | Value Theory | $250M | $60M | $6M |
   | **Average** | **$210M** | **$52M** | **$4.7M** |
   | **Range** | ±15% | ±14% | ±29% |
   

3. Assess Consistency

   • ±20% or less: Confident → use average
   • ±20-50%: Medium confidence → review assumptions
   • ±50%+: Low confidence → re-run methodology

4. Choose Conservative Value

   • Investor: Mid-range or lower 25%
   • Internal Plan: Upper range as stretch goal

Example: Analysis Difference

Bottom-up ($45M SAM) vs Top-down ($50M SAM) – Why?:

• Top-down: "SMB" in report includes up to 500 employees
• Bottom-up: We target only 10-100 employees
• Conclusion: Bottom-up is more accurate; adjust Top-down assumptions

---

Investor Presentation

Slide Structure (1 Page)

# Market Opportunity

## TAM / SAM / SOM

┌──────────────────────────────────────────┐
│  TAM   $200M   Korea SMB Accounting SaaS │
│    ↓                                      │
│  SAM    $50M   10-100 employees, cloud   │
│    ↓                                      │
│  SOM     $5M   5-year 10% market share   │
└──────────────────────────────────────────┘

### Methodology (Cross-Validated)
✓ Top-down: Gartner market report basis
✓ Bottom-up: 60,000 targets × ₩3.6M ARPA
✓ Value Theory: ₩6.3M/year savings basis

### Growth Drivers
• Cloud migration acceleration (15% annual)
• Digital tax invoice mandate (2025)
• SMB automation demand increase

Investor Red Flags vs Green Lights

Check	RED FLAG 🔴	GREEN LIGHT 🟢
TAM Size	<$500M	>$1B
SAM Logic	"Everyone"	Clear segment definition
SOM Basis	"We'll take 10%"	Unit economics reverse-calc
Growth Rate	Flat market	10%+ annual growth
Competition	Saturated	Fragmented or new
Methodology	1 only	2-3 cross-validated

Common Mistakes

❌ Over-estimation

• "Global $500B market, we'll take 1% = $5B"
• → Why 1%? How? Plan not shown

❌ TAM = SAM

• Ignores geography, segment, channel constraints
• → "Only Seoul, 3 districts" coverage missed

❌ Static Market

• Current size only, no growth rate
• → What about market in 5 years?

❌ Single Methodology

• Top-down only → unverified
• → Use minimum 2, ideally 3

✅ Good Example

TAM: $2B (2024) → $4B (2029, 15% CAGR)
SAM: $500M (Korea + SMB + SaaS 40% adoption)
SOM: $25M (5-year 5% market share)

Evidence:
• Top-down: Gartner report
• Bottom-up: 60K accounts × ₩5M ARPA
• Beta customer validation: ₩4.8M actual ARPA (±4%)

---

By Business Model

SaaS

TAM Calculation Basis:

• Total target customers (companies or people)
• ARPA × customer count
• Existing legacy solution market size

Key Assumptions:

• Cloud migration rate (on-premise → SaaS)
• Adoption rate (manual/Excel → software)
• ARPA (price per tier × mix)

Example:

• TAM = 100K companies × $500/month × 12 = $600M

Marketplace

TAM Calculation Basis:

• Total transaction value (GMV) × Take Rate
• OR: Offline market online conversion

Key Assumptions:

• Online penetration rate (e.g., 20% of used car sales)
• Take rate (10-30%, category-specific)
• Transaction frequency

Example:

• Korea used car sales: ₩45 trillion
• Online conversion: 20% = ₩9 trillion GMV
• Take rate: 3% → TAM = ₩270B

Consumer

TAM Calculation Basis:

• Total target users × ARPU
• OR: Replace offline spending

Key Assumptions:

• Target demographic size
• Smartphone adoption (mobile apps)
• Monetization willingness (subscription, IAP, ads)

Example (Fitness app):

• Korea 20-50 age exercise population: 10M
• App usage intent: 10% = 1M
• ARPU: ₩5,000/month → TAM = ₩600B/year

B2B Enterprise

TAM Calculation Basis:

• Account count (enterprises) × ACV
• OR: IT budget category share

Key Assumptions:

• ICP filters (industry, employee count, revenue)
• ACV (SMB <$50K, Mid $50-250K, Ent >$250K)
• Buying committee existence

Example:

• Korea manufacturing (500+ employees): 2,000
• IT budget ₩1B × 5% (our category) = ₩50M
• TAM = 2,000 × ₩50M = ₩100B

---

Execution Flow

1. Collect Input

   • Product description
   • Target customer (region, segment)
   • Pricing model (ARPA or ACV)
   • Competitors (if known)

2. Web Research (10-15 queries)

   • "Korea [industry] market size 2024"
   • "[category] global market size forecast"
   • "Number of [target customers] in [region]"
   • "[competitor] revenue ARR"
   • "ARPA benchmark [industry]"

3. Top-down Calculation

   • Find global/Korea market size
   • Apply filters (geography → segment → channel)
   • TAM → SAM → SOM

4. Bottom-up Calculation

   • Define target customer count
   • Set ARPA
   • Apply reach and conversion rates

5. Value Theory (optional)

   • Current solution cost vs our price
   • Savings or value addition
   • Willingness to pay validation

6. Cross-Validate

   • Compare 3 results
   • If ±20% range: use average
   • If wider: recheck assumptions

7. Create Output

   • Investor slide (1 page)
   • Assumptions doc (detailed calculation)
   • Data sources cited

---

Connected Tools

Tool Category	Placeholder	Use Case	Example Tools
Knowledge Base	~~knowledge base	Validate ARPA with internal customer data	Notion, Confluence
Spreadsheet	~~spreadsheet	Model market scenarios	Google Sheets, Excel
Data Enrichment	~~data enrichment	Verify against competitor data	THE VC, Innovation Forest, OpenDART
CRM	~~CRM	Extract actual conversion data	Relate, HubSpot

---

Related Skills

• startup-metrics: Set metrics to achieve SOM
• financial-modeling: Embed market sizing into revenue forecast
• competitive-landscape: Analyze competition within market
• gtm-strategy: Select GTM motion for SAM reach

---

Tips

• Conservative Assumptions: Investors always suspect over-optimism; downside estimates build credibility
• Growth Markets Preferred: Stagnant market < 10%+ growth
• Do All 3 Methods: 1 method = "not validated" impression; minimum 2, ideally 3
• Cite Data Sources: "Gartner 2024", "Statistics Korea 2023" — specifics matter
• Document Definitions: "SMB = 10-100 employees" — be explicit
• Reverse-Check SOM: $5M SOM ÷ $50K ACV = 100 customers needed. Realistic? Check.
• Market vs Us: TAM is market; SOM is us. Don't confuse.
• Korea Adjustments: Korea market smaller, lower ACV, slower adoption than US → calibrate

Detailed Methodology: See references/methodology-guide.md