Market Sizing

Build a bottom-up market size you can defend: explicit assumptions, a sanity check from the top down, and the number that would break it.

Size the market for [PRODUCT/SERVICE].

Who buys it: [THE BUYER, AS SPECIFICALLY AS POSSIBLE]
What they pay and how often: [PRICE + FREQUENCY, or your best assumption]
Geography and segments in scope: [WHERE AND WHO]
Data I have: [CUSTOMER COUNTS, INDUSTRY FIGURES, SURVEY DATA, YOUR OWN CONVERSION RATES]
Why I need this number: [FUNDRAISING / A BUILD DECISION / PLANNING. This changes which number matters.]

Produce:

1. **Bottom-up build**, which is the primary number. Chain: population of potential buyers, times the share that has the problem, times the share that would pay to solve it, times price, times purchase frequency. Show each step as its own line with the number, the source, and a confidence label of KNOWN, ESTIMATED, or ASSUMED. Never let an ASSUMED number pass without naming what would confirm it.

2. **Top-down sanity check.** Start from whatever industry figures I supplied and work down. If bottom-up and top-down differ by more than roughly 3x, do not average them: explain which assumption causes the gap and which build you trust more.

3. **TAM, SAM, SOM** stated as three separate numbers with their boundaries defined in one line each. SOM must be grounded in something real, like our capacity to reach buyers or a realistic share within three years, rather than a percentage of TAM picked because it sounds modest.

4. **Sensitivity.** Which two assumptions move the answer most, and what the number becomes at a plausible low and high value for each.

5. **The falsifier.** The single piece of evidence that would prove this estimate wrong, and the cheapest way to go get it.

6. **What I should say out loud.** The one-sentence version of this number with its main caveat attached, phrased for whoever I am presenting to.

Rules: use only figures I supplied. Do not retrieve market sizes from memory; industry reports you half-remember are the most common source of a wrong answer here. Any number you cannot trace to my input must be labeled ASSUMED with the reasoning shown, so I can replace it.

How to use

The instruction against recalled industry figures is the important one. Models produce confident, plausible, and unsourceable market sizes, and a top-down number sourced from a half-remembered report is exactly the kind of thing that survives into a fundraising deck and gets challenged in the room. Bottom-up with labeled assumptions is defensible even when it is wrong, because the reviewer can see which assumption they disagree with.

Originated fromStan SedberryUpdated
Researchadvanced

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