Market Sizing
npx machina-cli add skill zircote/sigint/market-sizing --openclawMarket Sizing (TAM/SAM/SOM)
Overview
Market sizing quantifies the revenue opportunity in a market. The TAM/SAM/SOM framework provides progressively refined estimates from total market to realistically achievable share.
Key Definitions
TAM (Total Addressable Market)
- Total global market demand for a product/service
- Assumes 100% market share (theoretical maximum)
- Useful for understanding ceiling and investor conversations
SAM (Serviceable Addressable Market)
- Portion of TAM targetable with current business model
- Considers geographic, demographic, or segment constraints
- More realistic than TAM
SOM (Serviceable Obtainable Market)
- Realistic market share achievable in near term (1-3 years)
- Considers competition, resources, and go-to-market capability
- Most relevant for planning
Calculation Methodologies
Top-Down Approach
Start with large market data, narrow down:
- Find industry market size from analyst reports
- Apply relevant percentage for target segment
- Adjust for geography if not global
- Factor growth rates for projections
Example:
- Global SaaS market: $200B (TAM)
- HR SaaS segment: 15% → $30B (TAM refined)
- North America: 40% → $12B (SAM)
- Achievable share 2%: $240M (SOM)
Pros: Fast, uses existing research Cons: May miss nuances, depends on source quality
Bottom-Up Approach
Build from unit economics upward:
- Identify target customer count
- Estimate price per customer
- Calculate total revenue potential
Example:
- Target customers: 50,000 SMBs
- Average contract value: $5,000/year
- Total: $250M (SOM)
- Expand to all SMBs (500,000): $2.5B (SAM)
- Include enterprise: $10B (TAM)
Pros: More defensible, validates assumptions Cons: Slower, requires customer data
Value Theory Approach
Estimate based on value delivered:
- Calculate customer pain point cost
- Estimate value of solution
- Apply capture rate (typically 10-30% of value)
Example:
- Customer loses $100K/year to problem
- Solution captures 20%: $20K willingness to pay
- 100,000 potential customers: $2B market
Trend Indicators
Apply three-valued logic to growth projections:
- INC (Increasing): Market growing >10% annually
- CONST (Constant): Market growth 0-10% annually
- DEC (Decreasing): Market contracting
Document evidence for each indicator:
- INC: "Analyst projects 25% CAGR through 2027"
- CONST: "Mature market with 3% annual growth"
- DEC: "Legacy technology being displaced"
Data Sources
Primary Sources (Most Reliable):
- Industry analyst reports (Gartner, Forrester, IDC)
- Government statistics (Census, BLS)
- Trade association data
- Company financials (public companies)
Secondary Sources:
- Market research firms (Statista, IBISWorld)
- News articles citing research
- Industry publications
- Competitor disclosures
Estimation Sources (Use Carefully):
- LinkedIn job counts × average salary
- Google Trends relative volume
- App store downloads × price
- Website traffic estimates
Output Structure
## Market Sizing Summary
| Metric | Value | Growth | Trend |
|--------|-------|--------|-------|
| TAM | $X.XB | X% CAGR | INC/DEC/CONST |
| SAM | $X.XB | X% CAGR | INC/DEC/CONST |
| SOM | $XXM | - | - |
## Methodology
[Top-down / Bottom-up / Hybrid]
## TAM Calculation
[Step-by-step with sources]
## SAM Derivation
[How SAM was narrowed from TAM]
## SOM Justification
[Realistic share rationale]
## Key Assumptions
1. [Assumption and sensitivity]
2. [Assumption and sensitivity]
## Data Sources
- [Source 1]: [What it provided]
- [Source 2]: [What it provided]
## Confidence Level
[High/Medium/Low with explanation]
Common Pitfalls
- Double-counting: Ensure segments don't overlap
- Currency confusion: Specify USD/EUR and year
- Stale data: Note data age, adjust for growth
- Over-optimism: SOM should be conservative
- Missing context: Include methodology for credibility
Scenario Modeling
For uncertain markets, provide range:
| Scenario | TAM | SAM | SOM |
|---|---|---|---|
| Bear | $5B | $500M | $10M |
| Base | $8B | $800M | $25M |
| Bull | $12B | $1.2B | $50M |
Use transitional scenario graphs to show how market might evolve between scenarios.
Additional Resources
For detailed templates and examples, see:
references/sizing-methodologies.md- Complete methodology guidereferences/data-sources.md- Source reliability ratingsexamples/market-sizing-report.md- Sample sizing report
Source
git clone https://github.com/zircote/sigint/blob/main/skills/market-sizing/SKILL.mdView on GitHub Overview
Market sizing quantifies revenue opportunity using TAM, SAM, and SOM to translate a market into actionable targets. It guides growth projections and investor discussions by progressively refining the total market to the share you can realistically win.
How This Skill Works
Start with TAM as the global ceiling, narrow to SAM by your business model and geography, then estimate SOM for near-term share. Choose among Top-Down, Bottom-Up, or Value Theory methodologies, and corroborate estimates with credible primary and secondary data sources. Present results in a TAM/SAM/SOM table and document growth trends and assumptions.
When to Use It
- You need to calculate the total addressable market (TAM) for a new product or service.
- You want to refine demand from TAM to SAM and SOM based on geography, segments, or business constraints.
- You are comparing market sizing approaches (Top-Down, Bottom-Up, Value Theory) to validate estimates.
- You are building growth projections or investor-ready market opportunity stories.
- You need guidance on choosing data sources and documenting assumptions for market size estimates.
Quick Start
- Step 1: Define TAM, SAM, and SOM and collect data from primary sources where possible.
- Step 2: Select a methodology (Top-Down, Bottom-Up, or Value Theory) and compute TAM, SAM, SOM.
- Step 3: Validate results with trend indicators and document assumptions; present as a Market Sizing Summary table.
Best Practices
- Start with TAM as the ceiling, then narrow to SAM and SOM.
- Use the three methodologies (Top-Down, Bottom-Up, Value Theory) and compare results.
- Ground estimates in credible data sources (primary first, secondary as cross-check).
- Document assumptions, growth rates, and trend indicators (INC/CONST/DEC).
- Present results in the Market Sizing Output Structure with sources.
Example Use Cases
- Top-Down: Global SaaS market: $200B TAM → HR SaaS 15% → $30B TAM refined → North America 40% → $12B SAM → 2% share → $240M SOM.
- Bottom-Up: Target customers 50,000 SMBs; Average contract value $5,000/year → $250M SOM; Expand to 500,000 SMBs → $2.5B SAM; Include enterprise → $10B TAM.
- Value Theory: Customer loses $100K/year; capture 20% → $20K willingness to pay; 100,000 potential customers → $2B market.
- Trend indicators: INC example with 25% CAGR through 2027; CONST example with 3% annual growth; DEC example as legacy tech being displaced.
- Data sources mix: Use primary sources (Gartner, Census) and secondary sources (Statista, IBISWorld); estimation sources include LinkedIn counts × salary, Google Trends, app downloads × price, and website traffic estimates.
