Key takeaways
- Bottom-up sizing multiplies customers by annual contract value, so every number can be checked against a source or a sales conversation.
- TAM is everyone who could buy, SAM is the part you can serve with today's product and reach, and SOM is the part you expect to win in a stated time.
- Split the market into segments when customers pay very different amounts, such as single clinics and large groups.
- A SOM is only believable if your selling pace can get there. Add customers signed per month and the tool checks it.
How to use the market size calculator
- 1Name your first customer segment and enter how many customers in it could buy, from a source you can cite such as a business register, an industry body or a public dataset.
- 2Enter the annual contract value: what one customer in that segment would pay you a year. Use your price list or real quotes, not a hoped-for price.
- 3Enter the share of the segment you can serve today, limited by geography, language, regulation or product fit.
- 4Add more segments if customers differ a lot, then enter the share of the SAM you expect to win and in how many years.
- 5Optionally add how many new customers you sign a month today, then copy the summary with every assumption.
TAM, SAM and SOM: the formulas
Total addressable market (TAM) is the yearly revenue if every possible customer bought from you. Serviceable available market (SAM) is the part your product and reach can serve today. Serviceable obtainable market (SOM) is the part you expect to win within a stated period.
Top-down sizing starts from a published industry total and takes a percentage of it. Bottom-up sizing starts from customers and prices you can check, which is why investors reading a deck often find it easier to test. The calculator only does bottom-up.
| Measure | Formula |
|---|---|
| Segment TAM | Customers that could buy × annual contract value |
| Segment SAM | Segment TAM × share you can serve today |
| TAM and SAM | Sum over all segments |
| SOM | SAM × share of the SAM you expect to win |
| SOM customers | SAM customers × share you expect to win |
| Months to sign them | SOM customers ÷ customers signed per month today |
A worked example: software for dental clinics
The tool loads with a fictional company selling scheduling software to dental practices. The customer counts are made up for the example; in a real deck each would need a source.
| Segment | Customers | Annual contract value | TAM | Share served today | SAM |
|---|---|---|---|---|---|
| Independent clinics | 40,000 | $3,000 | $120M | 25% | $30M |
| Dental groups (5+ sites) | 2,000 | $20,000 | $40M | 10% | $4M |
| Total | 42,000 | $160M | $34M |
Winning 5% of the SAM within five years gives a SOM of $1.7 million a year, or 510 customers. At 20 new customers a month, signing 510 takes about 26 months, inside the five years, so the tool raises no warning. At 5 a month it would take 102 months, and the tool says so.
Make the numbers hold up
- Cite where each customer count comes from and the date you read it. A reader should be able to find the same number.
- Count customers who have the problem and a budget, not everyone in an industry. A clinic that already runs on a hospital system may not buy.
- Use annual contract value you have actually charged or quoted. If you have no customers yet, say so next to the number.
- Keep the SAM honest about today: the countries, languages and segments you can sell to now, not after the next three products.
- Check the SOM against your sales capacity. The tool's months-to-sign check uses your own pace; it doesn't compare you with other companies.
Limits of a bottom-up estimate
- It is only as good as its inputs. A wrong customer count or price moves every figure in proportion.
- It is a yearly revenue snapshot. It doesn't model market growth, churn, expansion revenue or price changes over time.
- It treats segments as separate. If one customer could appear in two segments, remove the overlap before you enter the counts.
- It isn't a forecast or investment advice. A large TAM says nothing on its own about whether a company will win any of it.
How investors read a market slide
An investor reading a market slide usually asks where each number comes from and whether the SOM fits the go-to-market plan elsewhere in the deck. A copied summary with stated assumptions answers the first question before it is asked. For what else reviewers check, see how to evaluate a pitch deck or run the pitch deck grader.
Delsivo is designed to treat a market size in a deck as a claim with a slide citation, labelled Founder reported until checked. Cited research to compare such claims with sources is planned for the first release. See claims and evidence.