Market Size Calculator
Market size defines opportunity. Calculate TAM, SAM, and SOM for business planning and investor pitches.
How the Market Size Calculator works
Systematically calculate market opportunity using multiple methods. Validate estimates and present credible market analysis for strategic decisions.
Market size drives investment decisions. This calculator provides rigorous analysis for convincing business cases.
How it works
Tutorial
Market size calculation determines the revenue opportunity available to your business, informing strategy, pricing, and investment decisions. Understanding how to calculate TAM (Total Addressable Market), SAM (Serviceable Addressable Market), and SOM (Serviceable Obtainable Market) using both top-down and bottom-up approaches provides the foundation for credible business planning and investor pitches.
You have two options: use the calculator above for systematic market size analysis with multiple methodologies, or follow this guide to manually calculate market opportunity.
The Formula
| Market Type | Formula |
|---|---|
| TAM (Total Addressable) | Total Market Population × Average Revenue per Customer |
| SAM (Serviceable Addressable) | TAM × % You Can Reach with Your Model |
| SOM (Serviceable Obtainable) | SAM × Realistic Market Share % (1-5 years) |
Step-by-Step Calculation
Let’s calculate market size for a B2B SaaS product targeting small businesses.
Step 1: Define Target Market Parameters
Establish market boundaries:
| Parameter | Definition |
|---|---|
| Product | Project management SaaS for creative agencies |
| Geography | United States |
| Customer Type | Creative agencies with 10-100 employees |
| Industry Segment | Marketing, design, advertising agencies |
Step 2: Calculate Total Addressable Market (TAM) – Top-Down
Start with total market and narrow down:
| Market Layer | Value | Source |
|---|---|---|
| Total U.S. Businesses | 33,200,000 | U.S. Census Bureau |
| × % in Professional Services | × 14% | 4,648,000 |
| × % in Creative Industries | × 8% | 371,840 |
| × % with 10-100 employees | × 12% | 44,621 |
| Target Company Count | ~45,000 |
Calculation:33,200,000 × 0.14 × 0.08 × 0.12 =44,621 companies
Step 3: Calculate Revenue per Customer
Estimate annual revenue from typical customer:
| Component | Value |
|---|---|
| Average Team Size | 35 users |
| Price per User per Month | $25 |
| Monthly Revenue per Customer | $875 |
| Annual Revenue per Customer | $10,500 |
Calculation:35 users × $25 × 12 months =$10,500
Step 4: Calculate Total Addressable Market Value
Multiply companies by revenue potential:
| Component | Value |
|---|---|
| Target Company Count | 45,000 |
| Annual Revenue per Customer | × $10,500 |
| Total Addressable Market (TAM) | $472,500,000 |
Calculation:45,000 × $10,500 =$472.5 million
Step 5: Calculate Serviceable Addressable Market (SAM)
Narrow to segment you can actually serve:
| Constraint | Impact |
|---|---|
| TAM | $472,500,000 |
| Geographic Focus (top 25 metros) | × 60% |
| Technology Adoption (cloud-ready) | × 75% |
| Budget Availability | × 65% |
| Serviceable Addressable Market | $138,056,250 |
Calculation:$472,500,000 × 0.60 × 0.75 × 0.65 =$138.1 million
Step 6: Calculate Serviceable Obtainable Market (SOM)
Estimate realistic market share over time:
| Time Period | Market Share | SOM Value |
|---|---|---|
| Year 1 | 0.25% | $345,141 |
| Year 3 | 1.5% | $2,070,844 |
| Year 5 | 4.0% | $5,522,250 |
| Target (Year 5) | 4.0% | $5,522,250 |
Calculation for Year 5:$138,056,250 × 0.04 =$5.5 million
Reasoning:4% market share in 5 years is ambitious but achievable for well-executed SaaS in fragmented market.
Step 7: Validate with Bottom-Up Approach
Cross-check with operational capacity:
| Component | Value |
|---|---|
| Sales Reps (Year 5) | 8 |
| Deals per Rep per Year | 24 |
| Total New Customers/Year | 192 |
| Cumulative Customers (5 years) | 525 |
| Average Revenue per Customer | $10,500 |
| Bottom-Up Revenue (Year 5) | $5,512,500 |
Calculation:525 customers × $10,500 =$5.5 million
Validation:Bottom-up ($5.5M) closely matches top-down SOM ($5.5M), confirming estimate credibility.
Step 8: Calculate Market Penetration Rates
Show percentage of each market level:
| Market Level | Value | % of TAM | % of SAM |
|---|---|---|---|
| TAM | $472.5M | 100% | — |
| SAM | $138.1M | 29.2% | 100% |
| SOM (Year 5) | $5.5M | 1.2% | 4.0% |
Reasoning:Capturing 1.2% of TAM or 4% of SAM in 5 years is defensible for investor presentations.
Final Answer:TAM is$472.5 million, SAM is$138.1 million, and realistic Year 5 SOM is$5.5 million
What This Means
A $472M TAM demonstrates sufficient market size for venture investment, while the $138M SAM shows a substantial reachable opportunity. The $5.5M Year 5 SOM represents an achievable target that, at typical SaaS valuations (6-8x revenue), could create $33-44M in company value. The validation through bottom-up analysis strengthens credibility when presenting to investors or stakeholders.
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