The problem with top-down numbers

The most common approach to market sizing is top-down: take a global industry figure from a report, apply a percentage, and present the result. It is fast, but it hides three problems. The source figure often measures something slightly different from your market. The percentage is usually a guess. And the result says nothing about whether customers will actually buy from you.

“A market size is only useful if you can explain every step that led to it.”

TAM, SAM and SOM are not the same thing

Separating the three layers is the first step towards a realistic figure:

• Total addressable market (TAM): total demand for the category, if every possible customer bought.

• Serviceable addressable market (SAM): the part of that demand you can reach with your product, channels and geography.

• Serviceable obtainable market (SOM): the share you can realistically capture in a given period, considering competition and your resources.

Investment decisions should be based on SAM and SOM, not on TAM.

Build it bottom-up and cross-check it

A robust estimate starts from units you can observe: number of potential customers, purchase frequency and average ticket. These inputs come from official statistics, industry associations, tenders, company filings and, when needed, direct contact with the market. The bottom-up result is then compared with top-down references. If both approaches land in a similar range, the figure is credible. If they diverge, the gap tells you which assumption needs more work.

Make the assumptions visible

Every market size rests on assumptions. Writing them down, with their source and a sensitivity range, turns a single number into a tool for discussion. Decision makers can then see which variable matters most and where additional research would reduce uncertainty.

Final thoughts

A defensible market size is rarely the biggest number you could put on a slide. It is the one you can explain, source and stress-test, and that is exactly what makes it useful for deciding.

Need a market size you can defend?

We build market sizing studies from contrasted sources and clear assumptions. Contact us and tell us which market you are evaluating.