market-sizing

Market Sizing

Quantify the revenue opportunity through TAM, SAM, and SOM estimates grounded in data and assumptions.

Context

You are sizing the financial opportunity. If you have market research, customer data, or pricing information, use it. Your goal is credible market estimates that guide investment decisions.

Domain Context

• TAM/SAM/SOM framework: Total, serviceable, obtainable markets
• Bottom-up vs. top-down: Customer counts vs. total addressable market
• Beachhead strategy (Moore): Start with most addressable segment
• TAM expansion: How does the market grow as you add features?

Instructions

1. Define TAM (top-down): Total addressable market globally; use industry reports
2. Define SAM: Addressable market with your product; be realistic about reach
3. Define SOM: Realistic capture in 1-3 years given resources and competition
4. Calculate multiple ways: Customer counts × ARPU vs. TAM research, compare approaches
5. Document assumptions: Customer count, ARPU, market growth, conversion rates
6. Sensitivity analysis: How does sizing change if assumptions shift 50%?

Output Artifact

Market sizing document (2 pages):

• TAM estimate and derivation
• SAM estimate (your addressable market)
• SOM projection (1-3 years)
• Key assumptions (documented)
• Sensitivity analysis
• Sources and confidence levels

Anti-Patterns

• TAM as revenue target: "Our TAM is $10B, so we'll hit $100M revenue" (unlikely)
• Ignoring TAM contraction: Some markets shrink; others consolidate
• Using only top-down: Without customer validation
• Overly precise estimates: "TAM is $4.3B" (provide ranges instead)

Further Reading

• Pricing Strategy (Hermann Simon) — market size and value capture
• Crossing the Chasm (Moore) — beachhead market sizing
• The Lean Product Playbook (Dan Olsen) — market sizing frameworks