Market Sizer - Full Guide

Execution Workflow

Step 1: Define What You're Sizing

Ask the user:

What market are you sizing?

What product/service are you offering?

Who is the target customer? (Company type, size, role)

What problem does it solve?

What geography are you targeting?

What's the price point or annual contract value?

Sizing Parameters:

Parameter	Your Answer
Product/Service	[What you sell]
Target Customer	[Company type + buyer role]
Problem Solved	[Core pain point]
Geography	[Initial market]
Price Point	$[X]/month or $[X]/year

Step 2: Bottom-Up Analysis (Build from Units)

Bottom-up starts with your specific customer and multiplies out.

Ask the user:

Let's build from the ground up:

How many potential customers exist in your target segment?

What's your expected annual revenue per customer?

What percentage can you realistically reach?

What conversion rate do you expect?

Bottom-Up Formula:

TAM = Total Potential Customers × Annual Revenue Per Customer

SAM = TAM × Percentage You Can Reach (geographic, segment fit)

SOM = SAM × Realistic Market Share (usually 1-5% in years 1-3)

Bottom-Up Worksheet:

Component	Calculation	Value
TAM
Total companies in target segment	[Count]
× Companies with the problem	[%]
× Average revenue per customer	[$X/year]
= TAM		$X
SAM
TAM	$X
× In target geography	[%]
× In target company size	[%]
× Can afford your price	[%]
= SAM		$X
SOM (3-Year)
SAM	$X
× Realistic market share	[1-5%]
= SOM		$X

Step 3: Top-Down Analysis (Start from Industry)

Top-down starts with industry reports and narrows to your slice.

Ask the user:

Let's validate from the top:

What industry category does this fall into?

What's the total industry market size? (Look up reports)

What percentage is your specific segment?

What percentage is your geography?

Common Data Sources:

Gartner, Forrester, IDC (enterprise software)
Statista (general statistics)
IBISWorld (industry reports)
CB Insights, PitchBook (startup data)
Government census data (business counts)
Trade association reports

Top-Down Worksheet:

Component	Calculation	Value
TAM
Total industry market	[From report]	$X
= TAM		$X
SAM
TAM	$X
× Your segment's share	[%]
× Your geography's share	[%]
= SAM		$X
SOM (3-Year)
SAM	$X
× Realistic capture rate	[1-5%]
= SOM		$X

Step 4: Sanity Check (Compare Methods)

The two methods should be within 2-3x of each other.

Metric	Bottom-Up	Top-Down	Variance
TAM	$X	$X	[X%]
SAM	$X	$X	[X%]
SOM	$X	$X	[X%]

Interpretation:

Variance	Meaning	Action
< 50%	Good alignment	Proceed with confidence
50-200%	Reasonable variance	Investigate discrepancy
> 200%	Major misalignment	One method is wrong—investigate

Common Reasons for Variance:

Bottom-up overcounts potential customers
Top-down industry definition too broad
Pricing assumptions differ
Geography assumptions differ

Step 5: Market Dynamics Assessment

Ask the user:

What's happening in this market?

Is the market growing, stable, or shrinking?

What's the annual growth rate?

What's driving growth or decline?

Are there consolidation or disruption trends?

Market Dynamics:

Factor	Assessment
Growth Rate	[X% annually]
Growth Drivers	[What's causing growth]
Decline Risks	[What could shrink it]
Maturity	[Emerging/Growing/Mature/Declining]
Fragmentation	[Fragmented/Consolidating/Oligopoly]

Step 6: Timing Analysis (Why Now?)

Ask the user:

Why is NOW the right time?

What barriers existed before that are now gone?

What technology enables this now?

What behavior has changed?

What regulatory/economic shifts support this?

Why hasn't this been built before?

Timing Factors:

Factor	Evidence	Strength
Technology enabler	[What's now possible]	[Strong/Moderate/Weak]
Behavior shift	[What's changed]	[Strong/Moderate/Weak]
Economic driver	[Budget/spending change]	[Strong/Moderate/Weak]
Regulatory change	[What's now allowed/required]	[Strong/Moderate/Weak]
Competitive vacuum	[Why gap exists]	[Strong/Moderate/Weak]

Timing Score: Count "Strong" factors. 3+ = Great timing. 1-2 = Okay timing. 0 = Timing may be off.

Step 7: Market Size Adequacy Test

Is this market big enough for your ambitions?

Your Goal	Required SOM	Required SAM
Lifestyle business ($500K-2M/year)	$500K-2M	$10M+
Venture-scale ($10M+ ARR)	$10M+	$100M+
Unicorn potential ($100M+ ARR)	$100M+	$1B+

The 10% Rule: If you captured 10% of your SAM, would that be an interesting business?

If yes: Market is big enough
If no: Market too small or SAM definition too narrow

Output Format

# Market Sizing Report: [Product/Market]

## Executive Summary

**Target Market:** [Description]
**Geography:** [Initial focus]
**Price Point:** $[X]/year per customer

### Market Size Summary

| Metric | Bottom-Up | Top-Down | Final Estimate |
|--------|-----------|----------|----------------|
| TAM | $[X]M | $[X]M | $[X]M |
| SAM | $[X]M | $[X]M | $[X]M |
| SOM (3-Year) | $[X]M | $[X]M | $[X]M |

**Confidence Level:** [High/Medium/Low]
**Variance Between Methods:** [X%]

## Bottom-Up Analysis

### Assumptions

| Parameter | Value | Source |
|-----------|-------|--------|
| Total potential customers | [X] | [How calculated] |
| % with the problem | [X%] | [Source/estimate] |
| Average revenue/customer | $[X] | [Pricing model] |
| % in target geography | [X%] | [Source] |
| % can afford price | [X%] | [Estimate] |
| Realistic market share (3yr) | [X%] | [Conservative/moderate/aggressive] |

### Calculations

**TAM:** [X] customers × $[X]/year = **$[X]M**

**SAM:** $[X]M × [X]% geography × [X]% segment fit = **$[X]M**

**SOM:** $[X]M × [X]% market share = **$[X]M**

## Top-Down Analysis

### Data Sources

| Source | Data Point | Value |
|--------|------------|-------|
| [Report/Source] | [What it says] | $[X] |
| [Report/Source] | [What it says] | [X%] |

### Calculations

**TAM:** [Industry total from reports] = **$[X]B**

**SAM:** $[X]B × [X]% your segment × [X]% geography = **$[X]M**

**SOM:** $[X]M × [X]% capture = **$[X]M**

## Variance Analysis

| Metric | Bottom-Up | Top-Down | Variance | Explanation |
|--------|-----------|----------|----------|-------------|
| TAM | $[X]M | $[X]M | [X%] | [Why different] |
| SAM | $[X]M | $[X]M | [X%] | [Why different] |
| SOM | $[X]M | $[X]M | [X%] | [Why different] |

## Market Dynamics

### Growth Trajectory

| Metric | Value | Source |
|--------|-------|--------|
| Current market size | $[X]M | [Source] |
| Annual growth rate | [X%] | [Source] |
| Projected size (5 years) | $[X]M | [Calculation] |

### Market Stage

**Current Stage:** [Emerging/Growing/Mature/Declining]

### Competitive Landscape

| Player Type | Count | Market Share |
|-------------|-------|--------------|
| Market leaders | [X] | [X%] |
| Mid-tier players | [X] | [X%] |
| Small/emerging | [X] | [X%] |
| Your opportunity | - | [X% available] |

## Timing Assessment

| Factor | Evidence | Strength |
|--------|----------|----------|
| Technology | [What enables this] | [Strong/Moderate/Weak] |
| Behavior | [What's changed] | [Strong/Moderate/Weak] |
| Economic | [Spending shifts] | [Strong/Moderate/Weak] |
| Regulatory | [Policy changes] | [Strong/Moderate/Weak] |
| Competitive | [Gap in market] | [Strong/Moderate/Weak] |

**Timing Score:** [X/5 strong factors]

## Adequacy Assessment

### Your Ambition vs. Market Size

| Goal | Required SOM | Your SOM | Adequate? |
|------|--------------|----------|-----------|
| Lifestyle ($1M ARR) | $1M | $[X]M | [Yes/No] |
| Venture ($10M ARR) | $10M | $[X]M | [Yes/No] |
| Unicorn ($100M ARR) | $100M | $[X]M | [Yes/No] |

### The 10% Test

**If you captured 10% of SAM:** $[X]M × 10% = **$[X]M**

**Is this interesting?** [Yes/No]

## Recommendations

### If Market Is Big Enough (SOM > Your Goal)

- [ ] Proceed with validation using `idea-validator`
- [ ] Define go-to-market using `startup-icp-definer`
- [ ] Scope MVP using `mvp-architect`

### If Market Is Too Small

**Options:**
1. **Expand geography** — Add more markets to SAM
2. **Expand use cases** — Solve adjacent problems
3. **Move upmarket** — Target larger customers (higher ACV)
4. **Create category** — If market doesn't exist, you're creating it

### If Market Is Declining

**Warning:** Entering a declining market requires:
- Clear disruption thesis
- Technology that transforms the category
- First-mover on a new platform
- Otherwise, avoid

Market Size Benchmarks

By Business Type

Business Type	Typical SAM Needed	Typical SOM Target
Solo SaaS	$10M+	$500K-2M
Bootstrapped startup	$50M+	$2-10M
VC-backed seed	$100M+	$10M+
VC-backed Series A	$500M+	$30M+
Unicorn path	$1B+	$100M+

By ACV (Annual Contract Value)

ACV	Customers Needed for $1M ARR	Customers for $10M ARR
$100/year	10,000	100,000
$1,000/year	1,000	10,000
$10,000/year	100	1,000
$100,000/year	10	100

Common Mistakes to Avoid

Using only top-down: "The market is $10B, we just need 1%" — Lazy and unconvincing
Overcounting TAM: Including everyone even tangentially related
Ignoring competition: TAM means nothing if competitors own it all
Confusing TAM with SAM: Your serviceable market is usually much smaller
Static thinking: Markets change—size today ≠ size in 5 years
Ignoring timing: Right market, wrong time = failure
No bottom-up validation: Top-down without unit economics is guessing

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