Market sizing (TAM)

Companies × fit × price.

Every pitch deck has a TAM slide, and most of them are fantasy. A bottom-up estimate is simple multiplication, and it’s the version that impresses people who know what they’re looking at.

The move

Bottom-up TAM = number of potential customers × % who are a real fit × annual price. For seat-based products: companies × seats × price per seat per month × 12.

Worked example

40,000 agencies, 25% fit, $3,000/year

  1. 40,000 × 25% = 10,000 good-fit agencies
  2. 10,000 × $3,000 = $30M TAM
  • Keep the zeros separate: 10k × 3k = 30 × (k × k) = 30M.
  • Top-down ("1% of a $50B market") is the version investors don’t trust.