How to size a market (TAM, SAM, SOM) without making numbers up
TL;DR
Do two calculations. Top-down from a published industry number. Bottom-up from unit economics (customers × spend). Cross-check them. If they are miles apart, one is wrong and you need to know which.
The three numbers
TAM. Total addressable market. Every dollar spent globally on the problem you solve.
SAM. Serviceable addressable market. The subset the company could realistically sell into.
SOM. Serviceable obtainable market. What the company can realistically win in a 3 to 5 year window.
How to actually calculate them
Top-down. Start with a published industry number (analyst report, association data, regulator statistics). Filter down by geography, segment and channel.
Bottom-up. Count the actual customers (companies, households, users) and multiply by realistic spend per customer.
Cross-check. If the two numbers are within a factor of two, you probably have something honest. If they are ten times apart, dig into the assumptions.
How this shows up on the job
Every VC and PE IC memo has a market section. Weak market sizing is the fastest way to lose credibility. Doing two independent calculations and comparing them is what a good analyst does.
How Reuben AI helps
Reuben AI pulls market data from primary sources and shows both a top-down and bottom-up calculation side by side, with the source for every number. Students can start on the Free workspace.
Sources
Frequently asked questions
Which industry reports are free?
Government statistics (Census, BLS, OECD) and many trade association reports are free.
How honest should SOM be?
Very. SOM should assume normal execution, not the best case.
Can I quote a headline TAM from a consulting firm?
Only alongside your own calculation. IC memos do not rely on one third-party number.
How do I check my numbers?
Try a completely different calculation route. If both give a similar number, you are probably safe.
What if there is no published data?
Bottom-up is your friend. Count units × spend × frequency.
Learn on the platform you will use on the job.
Start with the Free workspace to practise IC memos, LBOs, DCFs and private-capital workflows. Faculty, program leads and student investment club leaders can book a demo to discuss teaching seats and program access.