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Claude Agent Skill · by Wshobson

Market Sizing Analysis

Calculates TAM, SAM, and SOM using three methodologies: top-down from industry reports, bottom-up from customer segments, and value theory from willingness to p

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Terminal · npx
$npx skills add https://github.com/wshobson/agents --skill market-sizing-analysis
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Market Sizing Analysis drops into any Paperclip agent that handles this kind of work. Assign it to a specialist inside a pre-configured PaperclipOrg company and the skill becomes available on every heartbeat — no prompt engineering, no tool wiring.

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---name: market-sizing-analysisdescription: Calculate TAM/SAM/SOM for market opportunities using top-down, bottom-up, and value theory methodologies. Use this skill when sizing markets, estimating addressable revenue, validating market opportunity for a new venture, or building investor-ready market analysis for a startup pitch or business plan.version: 1.0.0--- # Market Sizing Analysis Comprehensive market sizing methodologies for calculating Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) for startup opportunities. ## Overview Market sizing provides the foundation for startup strategy, fundraising, and business planning. Calculate market opportunity using three complementary methodologies: top-down (industry reports), bottom-up (customer segment calculations), and value theory (willingness to pay). ## Core Concepts ### The Three-Tier Market Framework **TAM (Total Addressable Market)** - Total revenue opportunity if achieving 100% market share- Defines the universe of potential customers- Used for long-term vision and market validation- Example: All email marketing software revenue globally **SAM (Serviceable Available Market)** - Portion of TAM targetable with current product/service- Accounts for geographic, segment, or capability constraints- Represents realistic addressable opportunity- Example: AI-powered email marketing for e-commerce in North America **SOM (Serviceable Obtainable Market)** - Realistic market share achievable in 3-5 years- Accounts for competition, resources, and market dynamics- Used for financial projections and fundraising- Example: 2-5% of SAM based on competitive landscape ### When to Use Each Methodology **Top-Down Analysis** - Use when established market research exists- Best for mature, well-defined markets- Validates market existence and growth- Starts with industry reports and narrows down **Bottom-Up Analysis** - Use when targeting specific customer segments- Best for new or niche markets- Most credible for investors- Builds from customer data and pricing **Value Theory** - Use when creating new market categories- Best for disruptive innovations- Estimates based on value creation- Calculates willingness to pay for problem solution ## Three-Methodology Framework ### Methodology 1: Top-Down Analysis Start with total market size and narrow to addressable segments. **Process:** 1. Identify total market category from research reports2. Apply geographic filters (target regions)3. Apply segment filters (target industries/customers)4. Calculate competitive positioning adjustments **Formula:** ```TAM = Total Market Category SizeSAM = TAM × Geographic % × Segment %SOM = SAM × Realistic Capture Rate (2-5%)``` **When to use:** Established markets with available research (e.g., SaaS, fintech, e-commerce) **Strengths:** Quick, uses credible data, validates market existence **Limitations:** May overestimate for new categories, less granular ### Methodology 2: Bottom-Up Analysis Build market size from customer segment calculations. **Process:** 1. Define target customer segments2. Estimate number of potential customers per segment3. Determine average revenue per customer4. Calculate realistic penetration rates **Formula:** ```TAM = Σ (Segment Size × Annual Revenue per Customer)SAM = TAM × (Segments You Can Serve / Total Segments)SOM = SAM × Realistic Penetration Rate (Year 3-5)``` **When to use:** B2B, niche markets, specific customer segments **Strengths:** Most credible for investors, granular, defensible **Limitations:** Requires detailed customer research, time-intensive ### Methodology 3: Value Theory Calculate based on value created and willingness to pay. **Process:** 1. Identify problem being solved2. Quantify current cost of problem (time, money, inefficiency)3. Calculate value of solution (savings, gains, efficiency)4. Estimate willingness to pay (typically 10-30% of value)5. Multiply by addressable customer base **Formula:** ```Value per Customer = Problem Cost × % Solved by SolutionPrice per Customer = Value × Willingness to Pay % (10-30%)TAM = Total Potential Customers × Price per CustomerSAM = TAM × % Meeting Buy CriteriaSOM = SAM × Realistic Adoption Rate``` **When to use:** New categories, disruptive innovations, unclear existing markets **Strengths:** Shows value creation, works for new markets **Limitations:** Requires assumptions, harder to validate ## Step-by-Step Process ### Step 1: Define the Market Clearly specify what market is being measured. **Questions to answer:** - What problem is being solved?- Who are the target customers?- What's the product/service category?- What's the geographic scope?- What's the time horizon? **Example:** - Problem: E-commerce companies struggle with email marketing automation- Customers: E-commerce stores with >$1M annual revenue- Category: AI-powered email marketing software- Geography: North America initially, global expansion- Horizon: 3-5 year opportunity ### Step 2: Gather Data Sources Identify credible data for calculations. **Top-Down Sources:** - Industry research reports (Gartner, Forrester, IDC)- Government statistics (Census, BLS, trade associations)- Public company filings and earnings- Market research firms (Statista, CB Insights, PitchBook) **Bottom-Up Sources:** - Customer interviews and surveys- Sales data and CRM records- Industry databases (LinkedIn, ZoomInfo, Crunchbase)- Competitive intelligence- Academic research **Value Theory Sources:** - Customer problem quantification- Time/cost studies- ROI case studies- Pricing research and willingness-to-pay surveys ### Step 3: Calculate TAM Apply chosen methodology to determine total market. **For Top-Down:** 1. Find total category size from research2. Document data source and year3. Apply growth rate if needed4. Validate with multiple sources **For Bottom-Up:** 1. Count total potential customers2. Calculate average annual revenue per customer3. Multiply to get TAM4. Break down by segment **For Value Theory:** 1. Quantify total addressable customer base2. Calculate value per customer3. Estimate pricing based on value4. Multiply for TAM ### Step 4: Calculate SAM Narrow TAM to serviceable addressable market. **Apply Filters:** - Geographic constraints (regions you can serve)- Product limitations (features you currently have)- Customer requirements (size, industry, use case)- Distribution channel access- Regulatory or compliance restrictions **Formula:** ```SAM = TAM × (% matching all filters)``` **Example:** - TAM: $10B global email marketing- Geographic filter: 40% (North America)- Product filter: 30% (e-commerce focus)- Feature filter: 60% (need AI capabilities)- SAM = $10B × 0.40 × 0.30 × 0.60 = $720M ### Step 5: Calculate SOM Determine realistic obtainable market share. **Consider:** - Current market share of competitors- Typical market share for new entrants (2-5%)- Resources available (funding, team, time)- Go-to-market effectiveness- Competitive advantages- Time to achieve (3-5 years typically) **Conservative Approach:** ```SOM (Year 3) = SAM × 2%SOM (Year 5) = SAM × 5%``` **Example:** - SAM: $720M- Year 3 SOM: $720M × 2% = $14.4M- Year 5 SOM: $720M × 5% = $36M ### Step 6: Validate and Triangulate Cross-check using multiple methods. **Validation Techniques:** 1. Compare top-down and bottom-up results (should be within 30%)2. Check against public company revenues in space3. Validate customer count assumptions4. Sense-check pricing assumptions5. Review with industry experts6. Compare to similar market categories **Red Flags:** - TAM that's too small (< $1B for VC-backed startups)- TAM that's too large (unsupported by data)- SOM that's too aggressive (> 10% in 5 years for new entrant)- Inconsistency between methodologies (> 50% difference) ## Industry-Specific Considerations ### SaaS Markets **Key Metrics:** - Number of potential businesses in target segment- Average contract value (ACV)- Typical market penetration rates- Expansion revenue potential **TAM Calculation:** ```TAM = Total Target Companies × Average ACV × (1 + Expansion Rate)``` ### Marketplace Markets **Key Metrics:** - Gross Merchandise Value (GMV) of category- Take rate (% of GMV you capture)- Total transactions or users **TAM Calculation:** ```TAM = Total Category GMV × Expected Take Rate``` ### Consumer Markets **Key Metrics:** - Total addressable users/households- Average revenue per user (ARPU)- Engagement frequency **TAM Calculation:** ```TAM = Total Users × ARPU × Purchase Frequency per Year``` ### B2B Services **Key Metrics:** - Number of target companies by size/industry- Average project value or retainer- Typical buying frequency **TAM Calculation:** ```TAM = Total Target Companies × Average Deal Size × Deals per Year``` ## Presenting Market Sizing ### For Investors **Structure:** 1. Market definition and problem scope2. TAM/SAM/SOM with methodology3. Data sources and assumptions4. Growth projections and drivers5. Competitive landscape context **Key Points:** - Lead with bottom-up calculation (most credible)- Show triangulation with top-down- Explain conservative assumptions- Link to revenue projections- Highlight market growth rate ### For Strategy **Structure:** 1. Addressable customer segments2. Prioritization by opportunity size3. Entry strategy by segment4. Expected penetration timeline5. Resource requirements **Key Points:** - Focus on SAM and SOM- Show segment-level detail- Connect to go-to-market plan- Identify expansion opportunities- Discuss competitive positioning ## Common Mistakes to Avoid **Mistake 1: Confusing TAM with SAM** - Don't claim entire market as addressable- Apply realistic product/geographic constraints- Be honest about serviceable market **Mistake 2: Overly Aggressive SOM** - New entrants rarely capture > 5% in 5 years- Account for competition and resources- Show realistic ramp timeline **Mistake 3: Using Only Top-Down** - Investors prefer bottom-up validation- Top-down alone lacks credibility- Always triangulate with multiple methods **Mistake 4: Cherry-Picking Data** - Use consistent, recent data sources- Don't mix methodologies inappropriately- Document all assumptions clearly **Mistake 5: Ignoring Market Dynamics** - Account for market growth/decline- Consider competitive intensity- Factor in switching costs and barriers  ## Quick Start To perform market sizing analysis: 1. **Define the market** - Problem, customers, category, geography2. **Choose methodology** - Bottom-up (preferred) or top-down + triangulation3. **Gather data** - Industry reports, customer data, competitive intelligence4. **Calculate TAM** - Apply methodology formula5. **Narrow to SAM** - Apply product, geographic, segment filters6. **Estimate SOM** - 2-5% realistic capture rate7. **Validate** - Cross-check with alternative methods8. **Document** - Show methodology, sources, assumptions9. **Present** - Structure for audience (investors, strategy, operations)