Saying "the global market is £500 billion and we only need 1%" is the classic market sizing mistake. It signals naivety about how markets work. Good market sizing is bottom-up, specific, and tells a story about realistic growth.
TAM, SAM, SOM Defined
Market sizing framework
| Term | Definition | Question |
|---|---|---|
| TAM | Everyone who could theoretically buy | What is the total potential if you had 100% share? |
| SAM | Portion you can realistically reach | Who can you actually sell to given your model? |
| SOM | What you will realistically capture | How much market share can you win in 3-5 years? |
Bottom-Up Sizing: The Credible Method
Bottom-up: Number of potential customers × price per customer × purchase frequency. Example: "500,000 UK SMBs with 5-50 employees. 15% have active need for AI automation at £3,000/year average contract = SAM of £225M."
SOM Calculation
SOM = SAM × your expected market share. 1-5% of SAM in Year 1-3 is credible. Back it up with comparable company benchmarks, not unsupported numbers.
Tanvir Tuhin
AI consultant, digital marketer, and study abroad mentor based in Aberdeen, UK. Founder of JJAT Education.
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