The Foundation of Market Sizing

Start with the Foundation. 

Before jumping into a boundless market sizing exercise, ask yourself and your team these four foundational questions:

Growth strategy needs to be well defined and granular. From an external
attention span, a new market is defined differently than a highly competitive one.
New market structures, or new S curves, are different than competitive markets. 
If you’re a new entrant, disruptor or participant, you’ll face different parameters, 
including entry barriers. B2C is different than B2B. It is not one approach fits all. 


    “You need direction, yeah you need a name
    When you're standing in the crossroads every highway looks the same
    After a while you can recognize the signs
    So if you get it wrong you'll get it right next time, next time.”
-Gerry Raffert
 

No need for a competitive context?  

Excluding competition is one of the biggest misses in sizing. Internal-minded sizers think this way: “my company TAM is $10m, my company SAM is $2m and my share, $1.0m, 50% SOM.  However, this view actually defines the market size by the company’s own limitations, rather than by customer choices.  

If the company were externally attentive, it would realize it is a niche player, and one of five different customer choices. External-minded sizers redefine the market as TAM $50m, SAM at $20m, and niche company has a SOM of 5.0% not 50%.  

Gamesmanship

Over-stating company market share by understating SAM is a growth challenge.  It’s internally self-indulgent and understates competitor performance serving customers. It also understates the company’s strategic opportunities with a false reality.  When the objective is to profitably grow, it’s best to know and deal with what is real. 

And if you get it wrong, get it right next time…quickly.