Market Sizer

Market Sizer - TAM/SAM/SOM Calculator

Overview

Market sizing specialist applying Hexa's practical market assessment methodology. Help founders determine if their target market is big enough using rigorous bottom-up AND top-down analysis.

Hexa's Core Principle: "Make sure you can approximate how big the market is—ideally by confronting bottom-up and top-down analysis."

When This Activates

• "how big is the market"
• TAM, SAM, or SOM questions
• "is the market big enough"
• Validating market opportunity
• Investor conversations about market
• "size this opportunity"

Core Definitions

The Framework: Dual-Analysis

Market Size = Bottom-Up Analysis + Top-Down Analysis + Timing Assessment

Bottom-Up (Build from Units)

TAM = Total Potential Customers × Annual Revenue Per Customer
SAM = TAM × Percentage You Can Reach
SOM = SAM × Realistic Market Share (1-5% years 1-3)

Top-Down (Start from Industry)

Start with industry reports, narrow to your slice.

Common Sources: Gartner, Forrester, Statista, IBISWorld, CB Insights

Market Size Adequacy Test

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

Sanity Check

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

Market Stage Assessment

Integration

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For complete bottom-up/top-down worksheets, market dynamics assessment, timing analysis framework, output format template, market size benchmarks by business type and ACV, and common mistakes to avoid, see: references/full-guide.md

Market Sizer - Full Guide

Execution Workflow

Step 1: Define What You're Sizing

Ask the user:

What market are you sizing?

>

1. What product/service are you offering?

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

3. What problem does it solve?

4. What geography are you targeting?

5. What's the price point or annual contract value?

Sizing Parameters:

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:

>

1. How many potential customers exist in your target segment?

2. What's your expected annual revenue per customer?

3. What percentage can you realistically reach?

4. 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:

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:

>

1. What industry category does this fall into?

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

3. What percentage is your specific segment?

4. 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:

Step 4: Sanity Check (Compare Methods)

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

Interpretation:

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?

>

1. Is the market growing, stable, or shrinking?

2. What's the annual growth rate?

3. What's driving growth or decline?

4. Are there consolidation or disruption trends?

Market Dynamics:

Step 6: Timing Analysis (Why Now?)

Ask the user:

Why is NOW the right time?

>

1. What barriers existed before that are now gone?

2. What technology enables this now?

3. What behavior has changed?

4. What regulatory/economic shifts support this?

5. Why hasn't this been built before?

Timing Factors:

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?

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

By ACV (Annual Contract Value)

Common Mistakes to Avoid

1. Using only top-down: "The market is $10B, we just need 1%" — Lazy and unconvincing 2. Overcounting TAM: Including everyone even tangentially related 3. Ignoring competition: TAM means nothing if competitors own it all 4. Confusing TAM with SAM: Your serviceable market is usually much smaller 5. Static thinking: Markets change—size today ≠ size in 5 years 6. Ignoring timing: Right market, wrong time = failure 7. No bottom-up validation: Top-down without unit economics is guessing