Reliable market sizing doesn't have to be as complicated or painstakingly slow as you think. This presentation offers a quick overview of the art and science of market sizing, and offers a step-by-step guide on how to conduct seven fast market sizing approaches.

1. Ins and Outs of Sizing a Market in No Time
Last Updated on: July 10, 2015
Created By: Brandon Hickie

2. Table of Contents
• Overview on Science of Market Sizing
• Understanding How to Think About a Market Opportunity
• Total Market Potential
• Total Addressable Market (TAM)
• Segmented Addressable Market (SAM)
• Expected Share of Addressable Market (ESAM)
• Opportunity Size Triangulation – 3 Ways to View an Opportunity
• What’s The Difference Between Top-Down and Bottoms-Up Approaches
• 8 Quick Market Sizing Approaches
• Quick Top-Down Market Sizing
• Analyst Spend Statistic Market Size
• Census-Based Market Sizing
• LinkedIn-Based Market Sizing
• Directory-Based Market Sizing
• Power Curve Market Sizing
• Resource Constraint Angle on Sizing
• Bureau of Labor Statistics Market Sizing

3. Overview on Science of Market Sizing
3

4. Understanding How to Think About a Market Opportunity
4
• 4 ways to think about market size. Knowing the level of detail necessary to address your concerns
is key to properly scoping the problem and approach.

5. Total Market Potential
• Definition: The potential sales value of a particular product or service within a specific target
segment over a specified time frame.
– How is it calculated?
• Total Market Potential = (# of Opportunities) x (Average Selling Price of Opportunities)
• Best to do this calculation at segment by segment level, not as an overall market.
– Important Assumptions:
• Company can win 100% of market opportunities.
• All opportunities within market are there for the taking.
• Price is consistent across market.
– Costs & Benefits:
• Statistic can be estimated in hours, not days.
• Useful for quickly understanding the potential for a B2B market opportunity in terms of
magnitude.
• Always grossly overstated, due to over-simplification.
5

6. Total Addressable Market (TAM)
• Definition: The potential sales value of a specific target segment over a specified time frame that
takes into consideration the available demand for a particular service or product.
– How is it calculated?
• TAM = (# of Opportunities) x (% Targetable Opportunities) x (Average Selling Price of
Opportunities)
• Targetable opportunities can be estimated via a market research survey or an
assessment of current market penetration.
• Best to do this calculation at segment by segment level, not as an overall market.
– Important Assumptions:
• Company can win 100% of its targetable opportunities.
• All opportunities within targetable segment are there for the taking.
• Price is consistent across all segments and customers.
– Costs & Benefits:
• Provides more realistic picture of market opportunity than total market potential.
• Always overstated
• Statistic can be estimated in a day or less if willing to use publicly available data to
estimate percentage of targetable opportunities.
6

7. Segmented Addressable Market (SAM)
• Definition: The potential sales value of a specific target segment over a specified time frame that
is limited to available demand for a particular service or product that can be addressed via a
specific business model and strategy.
– How is it calculated?
• SAM = (# of Opportunities) x (% Targetable Opportunities) x (% Opportunities Targeted
as Part of Business Model) x (Average Selling Price of Opportunities)
• The segment or business model addressable opportunities can be estimated via more
targeted market research.
– Important Assumptions:
• Opportunity tomorrow is same as opportunity today.
• Company can win 100% of its segmented or business model addressable opportunities.
– Costs & Benefits:
• Provides a more accurate estimate of actual revenue potential of a market or segment.
• Requires a more involved process, as you have to understand what percentage of the
market would be addressable via your business model.
• Inputs into calculation are difficult to come by and may require primary research which
can be very costly and time consuming.
7

8. Expected Share of Addressable Market (ESAM)
• Definition: The portion of the segmented addressable market sales value expected to be won,
due to a given produce or service, over a specified time frame.
– How is it calculated?
• ESAM = (Expected Win Rate) x (Segmented Addressable Market) x (Average Selling Price
of Opportunities)
• The win rate can be proxied by win rates in other similar segments or estimated via
market research.
– Important Assumptions:
• Opportunity tomorrow is same as opportunity today.
• Win rates are same across segments.
• Opportunity tomorrow is same as opportunity today.
• Price is consistent across all segments and customers.
– Costs & Benefits:
• Statistic provides most accurate estimate of actual market opportunity. Although
typically understated.
• Inputs into calculation are difficult to come by and may require primary research which
can be very costly and time consuming.
8

9. Developing a Clear Market Definition
• What is a Clear Market Definition?
– A series of externally identifiable characteristics that identify the group of companies who
would likely have a need for product/services and could reasonably be expected to consider
purchasing product/service or a competitor’s product/service within a given time frame.
• 6 Key Factors To Consider When Developing a Market Definition:
9
Market
Definition
Relevant
Good/
Service
Minimum
Viable
Opportunity
Resources
Timeframe
Costs
Opportunity
Limitations
Legend
Business Factor
Outside Factor

10. Opportunity Size Triangulation – 3 Ways to View an Opportunity
10
Opportunity
Size
Top-Down:
Percentage of total
revenue in current
market
Bottoms-Up:
Customer or
competitor customer
spend on this
category
Resource Constraint Sizing:
Ability and cost to serve
market within time and
resource constraints.

11. What’s The Difference Between Top-Down and Bottoms-Up Approaches
• Its all about how you view the market and what this enables you to see or prevents you from
seeing.
11

12. 8 Quick Market Sizing Approaches
12

13. Quick Top-Down Example
13
• Question: What is the market size for commercial printing services?
• Who are their target customers?
– Can we bucket each profiled customer by industry or another easily identified
attribute?
– Is there a minimum employee or revenue threshold to afford or need these services?
• We can use analyst firm IT Spend Statistics to figure this out.
• Minimum Revenue = Average Sales Price (ASP) / (% Revenue Spent on IT * %
Allocation of IT Budget Towards technology Area * % Take of Technology
Allocation )
• How many companies are in each of these target industries with the specified
characteristics?
– We use CapitalIQ, Jigsaw.com, LinkedIn.

14. Quick Top-Down Example Continued
14
• How much will customers be willing to spend on printing per a year?
– Can we estimate this from their current customers?
– If not, can we approximate number using publicly available competitor data?
• Key: Must be uniquely focused on space or breakout revenue in financial reporting.
• CapitalIQ and 10-ks are great sources for customer and revenue.
• We have a range, so conservatively estimate a high-end ($500k) and low-end ($200k)
• Putting it all together to calculate a market size:

15. Analyst Spend Statistic Market Size Example
15
• Question: What is the market size for disaster recovery services for a company who sells to
utilities and charges a minimum of $1,000 per a month for this type of service?
• What is minimum revenue for utility that would be likely to purchase DR services at this
price point or higher?
– We can use analyst firm IT Spend Statistics to figure this out.
• Gartner overall spend statistics
• Forrester DR/BC IT Spend Allocation Report
– Minimum Revenue = Minimum Sales Price / (% Revenue Spent on IT * % Allocation of IT
Budget Towards technology Area * % Take of Technology Allocation )
– Minimum Revenue = ($1,008*12)/(.062*.013*1.00) = $15,000,000
Company Annual
Revenue
Employee
Count
Allocation of
revenue to IT
budget (Utilities)
Allocatio
n of IT
budget
towards Target "take" %
Monthly Service
Price Can Afford
Inputs 0.9 6.2% 1.30% 100% 12
$5,000,000 6 $310,000 $4,030 $4,030 $336
$10,000,000 11 $620,000 $8,060 $8,060 $672
Basement $15,000,000 17 $930,000 $12,090 $12,090 $1,008
$20,000,000 22 $1,240,000 $16,120 $16,120 $1,343
$30,000,000 33 $1,860,000 $24,180 $24,180 $2,015
$40,000,000 44 $2,480,000 $32,240 $32,240 $2,687
$50,000,000 56 $3,100,000 $40,300 $40,300 $3,358
$75,000,000 83 $4,650,000 $60,450 $60,450 $5,038
$100,000,000 111 $6,200,000 $80,600 $80,600 $6,717

16. Analyst Spend Statistic Market Size Example Continued
16
• How many utilities generate less than $15 million in revenue per year in the United States?
– Looks like there are a couple good sources to make estimate: LinkedIn, US Energy information
Administration
– Need to convert revenue into an employee count to use LinkedIn. This can be done using an
industry revenue to employee multiplier.
• We can estimate total market opportunity without ASP since we have a canonical revenue list.
– Total Market Opportunity = ∑(Revenue* (% Revenue Spent on IT * % Allocation of IT Budget
Towards DR/BC) = $248,000,880
• What is our expected take of this market?
– Let’s use our current overall win rate of 25%.
– So total market opportunity = (25% * $248,000,880) = $62,220,000
Source Number of Utilities Confidence
LinkedIn 1309 Medium
US Energy Information Administration 1,225 High
Best Estimate 1,225 High

17. Census-Based Market Sizing Example
• Question: What is market size for firm who sells to US-based
architecture firms with greater than $2.5M in revenue and an ASP
of $5,000 per year?
• How many US-based architecture firms are there with greater
than $2.5M in revenue?
• Employee to Revenue Conversion: 20 employee minimum
• Find NAICS Codes for target space: 54131 and 54132
• Finding right Census Dataset - focus on dataset that is most
granular with firm size on low-end.
• Note: Hierarchical data so components are only additive when have
same number of NAICS digits.
• What is the overall market opportunity for this firm?
– Target Market Opportunity = Number of Opportunities * ASP =
(1857+365) * 5,000 = $11,110,000
17
Multiple
relevant NAICs
for a specific
sector.
Sometimes at
different
hierarchy in
data.

18. LinkedIn-Based Market Sizing Example
• Question: What is market size for firm who sells to US-based architecture firms with greater
than $2.5M in revenue and an ASP of $5,000 per year?
• How many US-based architecture firms are there with greater than $2.5M in revenue?
• Employee to Revenue Conversion: 20 employee minimum
• Identify parameters and determine if need to qualify by advanced keywords search.
• Determine if opportunity at firm or location level.
• Pull Counts by Company Size Ranges
18
Any
Size
Not
Specified 1 to 10 11 to 50
51 to
200
201 to
500
501 to
1,000
1,001 to
5,000
5,001 to
10,000 10,000+
None Architecture &
Planning
Location Count 7,326 1,121 3,514 1,917 632 91 22 24 2 3
None Architecture &
Planning
Headquarters Only 6,637 1,004 3,132 1,767 601 87 20 21 2 3
Architectural
Services
Architecture &
Planning
Location Count 1,239 158 588 375 97 15 1 5 0 0
Architectural
Services
Architecture &
Planning
Headquarters Only 1,098 135 510 338 95 15 1 4 0 0
Architectural
Design
Architecture &
Planning
Location Count 2,080 269 1,038 584 159 21 3 6 0 0
Architectural
Design
Architecture &
Planning
Headquarters Only 1,827 231 888 527 153 20 3 5 0 0
Architectural
Landscape
Architecture &
Planning
Location Count 141 19 69 32 18 1 0 2 0 0
Architectural
Landscape
Architecture &
Planning
Headquarters Only 125 17 61 27 18 1 0 1 0 0
Search Term Category Type
Company Count by Employee Size

19. LinkedIn-Based Market Sizing Example Continued
• Estimate composition of company size range that overlaps cut-off point using alternative
source like Census Data.
• Quarantine any data that does not need to be included in transformation to minimize
exposure to assumption.
• Apply conversion ratio to LinkedIn estimate and calculate number of opportunities:
• What is the overall market opportunity for this firm?
• Target Market Opportunity = Number of Opportunities * ASP = (960+189) * 5,000 = $5,745,000
19
Segment
Number of
Firms Total 0-4 5-9 10-19 20-99 100-499 500+
Number of
Firms >10 <20 20-99 100+
Architecture Services 23,581 14,704 4,482 2,481 1,599 262 53 4,395 56.45% 36.38% 7.17%
Firm Population Ratio
Approach
Less Than 20
Employees
100
Employees
or More Total
LinkedIn Category: "Architecture & Planning" 5,033 193 6,205
LinkedIn Search: "Architectural Landscape" 99 4 122
LinkedIn Derived 4,934 189 6,083
19
979
20 to 99 Employees
960

20. Directory-Based Market Sizing Example
• Question: What is market size for firm who sells to US firms in Financial Service industry with at
least 1,000,000 customers and an ASP of $100,000?
• What does this target market entail?
• Can it be broken-down into sub-markets?
• FDIC Insured versus Non-FDIC Insured
• Type: Commercial Bank, Retail Bank, Asset Management Company, etc.
• What is definition of Opportunity?
• Firm, location, division?
• How many US-based financial service firms are there with at least 1 million customers?
• Identify Directories
• Government Directories: Regulatory Agency and Regulation directories and databases
• Private Directories: Top firm lists, Association membership lists, licensing organizations
• Does any combination of directories allow for us to directly or indirectly estimate customers
and cover the whole space we are interested in sizing?
• FDIC Insured US Banks Database
• Towers Watson 2012 Top 500 investment firms
20

21. • Build list of companies by sub-market
• Review data on companies to see what might be able to be used to estimate customers
• Assets under management looks the best as it is available in both sources.
• Convert Assets Under Management to Customers for list of companies.
• Create combined list of firms with at least 1 million customer, dedup and count. We get 119.
• What is the overall market opportunity for this firm?
• Target Market Opportunity = Number of Opportunities * ASP = (119) * 100,000 = $11,190,000
Directory-Based Market Sizing Example Continued
21
Wells Fargo TD Bank Average
Customers 70,000,000 20,500,000
Assets 514,853,000,000 $98,613,149,000
Average Assets Per Customer 7,355 4,810 6,083

22. Power Curve Market Sizing Example
• Question: What is market size for company that
sells to accounting firms with $20 Million in
revenue if their ASP was $100,000 per year?
• How many accounting firm opportunities are
there?
• Prior Knowledge: This space is dominated by
the Big 4 (Ernst Young, KPMG, Deloitte,
PWC).
• Hypothesis: May be extremely consolidated
space, whereby we can use power curve to
estimate.
• Validate Hypothesis: Power curve
hypothesis is validated by Chart of top 25
accounting firms by revenue and then top
100 firms by revenue to confirm theory.
• Not strong enough to answer question
outright if need an exact number.
22

23. Power Curve Market Sizing Example Continued
23
• What is total revenue of accounting market?
• The top 100 firms account for
$49,468,330,000 and the total
accounting market is
$374,000,000,000. However, this
seems to include lots of other spaces.
• Can we estimate employment composition
for top 100 versus rest of market?
• No public data on this.
• Last resort, can graph revenues of top 100
and extrapolate out.
• 108 firms in target
• What is overall market opportunity for firm?
– Target Market Opportunity = Number of
Opportunities * ASP = 108 * $100,000 =
$10,800,000

24. Resource Constraint Angle on Sizing Example
• Question: What is the market opportunity 1- year out for a firm selling marketing
automation software to financial service firms with at least 50 million in revenue?
• Resource Constraints:
• Can bring on board 5 salespeople within budget this year
• Each salesperson can make 10 phone calls a day that get through to a
prospect
• 3 weeks of vacation per employee
• 25% of attempts will convert into opportunities
• 20% of opportunities will convert into sales
• 5% of the sales calls will convert within six months
• ASP $240 revenue per year
• Insight: Market size looks big enough to withstand well over a year of growth, so real
constraint is company’s own resources.
• What can we expect the sales to be after first year of operation?
• 10 calls/day x ((365 days/year - 21 vacation days)*(5/7)) x 25% opportunity
conversion rate * 20% sales conversion rate x $240/sale x 5 salespeople =
$147,000
24

25. Bureau of Labor Statistics Market Sizing Example
• Question: What is the U.S. market size for a real estate sales associate enablement
tool that costs $3 per user per month? And how will this market change by 2022?
• Who are your target users?
• Real Estate Sales Associates (Non-Brokers)
• Can use BLS employment tables to find specific occupation code: 41-9022
• Is this a horizontal solution or is focused on a subset of industries?
• No, it is a vertical product focused on residential real estate. This is
identified as code: 531000 in the BLS data
• How many retail sales associates are there in the U.S.? 139,000
• So the market size today is: 139,100 * 12 months = $1,669,200
• What do we project the market size will be in 2022? 1,669,200 * (1 + 12%
Forecasted Percentage Change) = $1,869,504

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