MCP tool: pm_market_size

Market Sizing (TAM/SAM/SOM)

Three numbers that estimate how big your opportunity is: the whole pond, the part you can fish, and what you'll realistically catch.

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.

When NOT to use this

Post-PMF growth-stage decisions. You don't need TAM; you need to know which customer segment is healthiest. TAM is most useful pre-PMF. Obsessing over it after PMF is procrastination dressed up as strategy.

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 an industry report total, slice down to your segment. Fast. Often wrong. Most industry reports are vendor-funded.
  • Bottom-up: Count target customers from the ground up, multiply by ACV. Slower. Defensible.

If both methods give you wildly different numbers, your assumptions are wrong somewhere. Do both, and use the gap as a diagnostic.

A worked example

You're building a B2B SaaS for accounting firms in the US.

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 bottom-up SAM ($540M) and top-down slice ($750M) are within 40% of each other. Reasonable. If they were 10x apart, one of your assumptions is wrong.

How pmtoolkit does it differently

The calculator pushes you to do both top-down and bottom-up if you want to call your number trustworthy. The gap between them is itself a useful signal. If they're 10x apart, your assumptions are wrong somewhere -- the calculator surfaces the gap and asks which input you trust less.

Common mistakes

  • Stopping at TAM. TAM is for fundraising slides, not strategy. SOM is what you're actually planning against.
  • Treating top-down industry reports as fact. Most are paid for by vendors who want the market to look bigger.
  • Using a 10-year horizon to inflate SOM. If you need a decade to hit your SOM, you don't have a SOM -- you have a wish.
  • 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.
  • Reporting one method only. Top-down without bottom-up is a guess. Bottom-up without top-down is unanchored.

Try it

Live calculatorRaw .md
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