How to size your market bottom-up: TAM, SAM and SOM

What TAM, SAM and SOM mean

The three numbers answer three different questions. Pitch decks and AI tools often mix them up, so define each one before you calculate anything.

• TAM (total addressable market) is the yearly revenue if every possible buyer in the world bought your product at your price.
• SAM (serviceable addressable market) is the part of TAM your product can serve today. Country, language, customer size, the integrations you support and the channels you can use all limit it.
• SOM (serviceable obtainable market) is the part of SAM you can win in a set time, usually 3 years, with your team, your budget and your competitors.

All three are yearly revenue in one currency. A figure in users, downloads or "spending on the category" measures something else. Convert it to yearly revenue or leave it out. The glossary defines each term in plain words.

Why bottom-up beats top-down

A top-down estimate starts from a large industry figure and cuts it down. For example: "Dental care is a huge global market, and software is 2% of it." The result rests on two numbers you cannot check, the industry total and the 2%.

A bottom-up estimate starts from buyers you can count and a price you can defend:

Market size = number of buyers x price per buyer per year

You can check each input. Official statistics tell you how many businesses work in an industry. Competitor pricing pages tell you what buyers pay today. When an investor challenges your number, you can show every step. Keep top-down for one job only: a cross-check at the end.

A worked example

The numbers below are invented to show the method. They are not research about dental practices. Replace each one with a count or a price you can source.

The idea is a tool that sends appointment reminders and fills canceled slots for dental practices. It costs $79 a month per practice, so $948 a year.

How the SAM filters work

Start from the TAM count and remove the buyers you cannot serve yet. Write each filter on one line, with its number and its source:

1. Country: only the country where you can sell and give support in its language.
2. Segment: independent practices only, because chains buy through a central team and take months to decide.
3. Fit: only practices that use a booking system you connect to on day one.

Each filter needs a number. If you guess that 60% of practices are independent, label it as an assumption. Then plan how you will replace it with a source.

How to build SOM from capacity

Do not write "we will take 1% of the market". Build SOM from what your team can do:

• Demos per week: 15.
• Selling weeks per year: 46, so 690 demos a year.
• Close rate: 20%, so 138 new practices a year.
• After 3 years, with some customers leaving: about 350 paying practices.

Here SOM is about 3% of SAM. The share comes out of the plan, so you never had to pick it. If an investor asks how you reach 1,000 practices, you now have a concrete question to discuss: which hires or channels add the missing demos.

Where to find buyer counts

Good counts come from official statistics, company registers and professional bodies. Use market research press releases only when nothing else exists.

• United States businesses. County Business Patterns, from the US Census Bureau, counts establishments with paid employees by industry and employment size. Look up your industry by its NAICS code. Offices of dentists, for example, are NAICS 621210. An establishment is one location, so a chain with 20 clinics counts 20 times.
• Professions. If you sell to people in one job, the Occupational Employment and Wage Statistics program from the US Bureau of Labor Statistics estimates employment and wages for about 830 occupations, by state and by metropolitan area.
• European businesses. Eurostat's structural business statistics describe businesses by size class and economic activity, for each country and for the EU.
• Other countries. Most national statistics offices publish business counts by industry code. Company registers and licensing bodies for professions often publish counts too.
• Consumers. Start from census population data for your country and age group. Then apply filters you can source, such as households with a child under 5.

Write the year next to every count. Official business data is often a few years old. On 7 November 2026, the latest County Business Patterns data was for 2023.

How to set the price per buyer

Use the yearly price a buyer would pay, based on what buyers pay today for the same job.

• Read 3 to 5 competitor pricing pages. Note the plan your buyer would most likely pick, and write down the date you read each page.
• If buyers pay nothing today and use a spreadsheet, compare your price with the time they spend. Two hours a week at $30 an hour is about $3,100 a year of staff time.
• Use one price per segment. A one-chair clinic and a group of 40 clinics do not pay the same, so size them as two rows.

Seven signs a market number is wrong

Use this list on your own deck, on investor decks and on AI output.

1. It measures a whole industry instead of the buyers of your product. Total healthcare spending does not size the market for a reminder tool.
2. It has no year, no country or no currency.
3. It comes from a press release that gives a growth rate but no method. The method sits in a paid report you have not read.
4. SOM is a round share of TAM, such as 1% or 10%, with no sales plan behind it.
5. It mixes units. Users, accounts, downloads and revenue are added together or compared as if they were the same thing.
6. SAM includes buyers your product cannot serve yet, for example in other languages or of other company sizes.
7. Two sources differ by five times or more, and the deck shows only the larger one. Show the range and say which source you trust and why.

A market figure without a link to the page that contains it is an assumption, even when it has two decimal places.

Check your number three ways

1. Top-down. Compare your SAM with any industry figure you can find. If your bottom-up SAM is larger than all software spending in that industry, one of your inputs is wrong.
2. Competitors. If competitors publish customer counts on their own sites, add them up. Your SAM should be clearly larger than what they already sell together. A small SAM that existing companies already fill leaves little room for you.
3. Demand. Google Trends shows search interest on a scale of 0 to 100, relative to all searches in that place and time. It does not show search volume, and terms with very low volume appear as 0. Use it to see whether interest grows or falls, and in which countries.

Where an AI validator helps

A careful bottom-up model takes a few days of desk research. An AI validator can give you a first draft to check and correct.

Preuve AI's free scan includes a first market size read. Treat it as a number to check before you use it.

The $59 Founder Report adds TAM, SAM and SOM, with estimates labeled as estimates. Use the report as the first draft of your model. Keep the counts you can verify, and replace the assumptions with your own sources.

Questions & answers

How does Preuve AI relate to market sizing?

Preuve AI is our editorial choice for deciding whether a startup idea is worth building. Its $59 Founder Report sizes TAM, SAM and SOM, with estimates labeled as estimates. Treat that model as a first draft, and check each buyer count yourself.

What is the first practical step?

Write one sentence that names your buyer and the country where you sell. Then find one public count of those buyers, such as a business register, and note its year and its source.