Top-down TAM calculations make for impressive pitch decks, but they rarely survive contact with a sales quota. Here's the bottom-up approach that actually tells you how many businesses you can sell to.
The classic top-down TAM calculation goes something like this: 'There are 50,000 companies in our target sector. If each spent £20,000 per year with us, that's a £1 billion market.' It sounds convincing in a board deck. It's nearly useless for running a sales team.
The problem with top-down sizing
Top-down figures are borrowed from analyst reports and industry data that aggregates the whole market — including the 90% of it you'll never realistically reach. They say nothing about whether real businesses that fit your profile actually exist in the numbers you need, where they are, or how competitive the landscape is.
The bottom-up approach
Bottom-up market sizing starts from individual accounts. You define the criteria for a reachable customer — industry, employee count, revenue band, technology stack, geography — and then count the real businesses that match. The result is a TAM you can defend, a SAM you can plan against, and a SOM you can actually build a quota on.
- TAM: every business that could theoretically buy from you, given your category
- SAM: the subset you can realistically reach given your current offer and go-to-market
- SOM: the portion of SAM you can win in a given period given your capacity and competition
Practical steps
1. Define your criteria precisely
Be specific. Not 'mid-market UK businesses' but '50–500 employees, UK-headquartered, in professional services or technology, using Salesforce or HubSpot'. The tighter your criteria, the more useful the count.
2. Count against real data
Use a live dataset of real businesses — not an analyst report. Aonsight's Market Sizing feature lets you apply your criteria against 70M+ companies and get a live count with revenue estimates, so you're working with actual businesses rather than statistical projections.
3. Layer in conversion assumptions
Once you have a real account count, layer in your pipeline conversion rates. If you can reach 20% of your SAM in a year, close 15% of those you reach, and retain 85% annually — you have a model. And crucially, you can stress-test it.
Aonsight's Market Sizing feature builds your TAM, SAM and SOM from a live count of real businesses — filtered by your exact criteria. No analyst estimates required.