MCP tool: pm_market_size

Market Sizing (TAM/SAM/SOM)

Estimate the total market, the portion you can serve, and the share you could capture.

When to use this

You're writing a business case or a fundraising deck. You're deciding whether a new market is worth entering. You're sizing a new segment to compare against the one you're already in. The number needs to survive a skeptical reading.

Limits

Market size alone cannot tell you which current customer segment is healthiest or which feature to build. Pair it with retention, unit economics, and customer research. It can still be useful when an established product enters a new market.

Inputs

  • Customer count: How many businesses or people fit your buyer profile.
  • Average contract value (ACV) or price: What a typical customer pays per year.
  • Reachable share: The percentage you can actually sell to given your channel, geography, and product capability today.
  • Realistic capture rate: The percentage of the reachable market you think you'll win in a defined time window (usually 3-5 years).

The math

LayerWhat it isFormula
TAMTotal addressable market. Everyone who could buy.Total customers x ACV
SAMServiceable addressable market. Everyone you can sell to.TAM x reachable share
SOMServiceable obtainable market. What you'll capture.SAM x realistic capture rate

Two methods to get there:

  • Top-down: Start with a published market total and narrow it to your segment. Check the source, date, and market definition.
  • Bottom-up: Count target customers and multiply by annual revenue per customer. Document the count and pricing assumptions.

If the methods give substantially different numbers, compare their market definitions and assumptions.

A worked example

Suppose you are building a B2B SaaS for accounting firms in the US. All market counts, prices, and shares below are illustrative.

Bottom-up:

  • US accounting firms: ~140,000 (illustrative -- pull the actual count from the US Census or AICPA in real use)
  • Target segment (firms with 5-50 employees): ~45,000
  • ACV: $12,000/year
SAM = 45,000 x $12,000 = $540M

3-year SOM at 1% penetration of SAM:

SOM = $540M x 1% = $5.4M ARR

Top-down sanity check:

  • US accounting software market (illustrative): ~$5B
  • Mid-market slice: ~15% = $750M

The top-down figure is about 39% above the bottom-up estimate. That difference is a reason to review market boundaries and assumptions, not proof that either estimate is accurate.

In PM Toolkit

The calculator lets you choose top-down or bottom-up TAM. It applies six reachability filters to current TAM for SAM, then adjusts the target share using competition, maturity, and execution-readiness assumptions for SOM. Projected TAM is reported separately. It does not automatically compare both methods.

The worked example above shows the simpler SAM × capture-rate calculation. To reproduce it in the tool, use assumptions that leave the target share unchanged; otherwise the adjustments change SOM.

Common mistakes

  • Reporting TAM without explaining which customers you can serve and what share you expect to capture.
  • Treating an industry estimate as an exact count. Check its scope, method, and date.
  • Leaving the time horizon unstated. Explain the resources and assumptions behind the capture rate.
  • Ignoring the practical question: "and what would you have to do to actually get there?" If your 3-year SOM requires hiring 200 sales reps you can't afford, the number is fiction.
  • Ignoring differences between methods when both are available. Use the comparison to inspect assumptions.

Try it

Live calculatorRaw .md
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