The Brutal Truth About Market Sizing

Introduction

Many founders pitch TAM like a golden ticket: “The market is $10B. If we just capture 1%…”

“You are not a lottery ticket.” – Peter Thiel, Zero to One

But TAM isn’t a golden ticket. It’s not even an “if the stars align” number. No company will ever sell to TAM. TAM is a theoretical construct showing market scope, not your opportunity.

Investors don’t fund theory. Boards don’t manage theory. Customers don’t buy theory.

They fund execution. They manage reality. They buy outcomes.

Market Sizing Comes First – Always

Step one is a rock-solid market sizing. It’s the foundation. Without it, everything else is built on sand.

• Market sizing grounds your GTM strategy.
• GTM strategy builds your sales projections.

In the beginning, your models will be full of assumptions. That’s okay. But:

Pressure test your hypotheses. Collect real data as early as possible. Replace assumptions with facts.

Your market sizing, GTM, and sales projections must be coherent, consistent, and rational. Investors and boards see thousands of pitch decks. They pick up inconsistencies instantly, and confidence in your executional rigor erodes when they do.

Make Sure You’re Sizing Your Market, Not Someone Else’s

TAM (Total Addressable Market) is an abstraction. It’s what McKinsey gets paid to calculate – the total global revenue possible if every potential buyer purchased your category, not your product.

TAM Example

You sell fleet management SaaS. TAM is all companies operating fleets globally multiplied by your potential ACV. But you will never sell to all of them. TAM only tells you that the market exists.

SAM Example

SAM (Serviceable Available Market) narrows TAM to the portion you can realistically target with your business model and GTM approach.

You’re selling only in the US, only to fleets with >20 vehicles. Your SAM is the number of such fleets times your realistic ACV. This is directional, not actionable.

SOM Example

SOM (Serviceable Obtainable Market) is the critical piece. It’s your real, winnable revenue opportunity over the next 3-4 years.

SOM (Bottom-Up Calculation)

1. Market unit: US fleets with >20 vehicles = 10,000 companies
2. Reachable prospects this year: You have 2 SDRs, each contacting 500 qualified accounts/year → 1,000 prospects reachable
3. Meeting-to-opportunity conversion: 20% → 200 opportunities
4. Win rate: 25% → 50 closed deals
5. Average contract value (ACV): $30,000 → $1.5M SOM for this year

Beware of SOM Fantasy

If a company claims its SOM is $50M in four years, that implies 99.9-percentile startup performance.

• Only 4% of SaaS startups ever reach $1M ARR.
• Only 0.4% reach $10M ARR.
• Achieving $50M ARR within 4-5 years places a company in the top 0.1% globally.

Examples of companies that achieved such outlier growth:

• Zoom: Reached $100M revenue in ~2 years.
• Datadog: Hit $100M revenue within ~5 years.
• CrowdStrike: Achieved $100M in ~5 years.

Can you persuasively explain why your company will be in the 99.9th percentile?

• Does the team have prior execution at this scale?
• Does the GTM strategy support the speed and volume required?
• Does the cash flow model account for the hiring, onboarding, and CAC needed?

If not, it’s not a plan. It’s a fantasy. Strong boards will push the founder to clarify assumptions and re-anchor on achievable targets.

TAM and SAM Are Directional. SOM Is Survival

Investors and Boards want TAM and SAM to understand market potential. But SOM is what keeps you alive. You don’t sell to an abstract market. You sell to real customers, under real constraints, with your actual resources.

Reality Check for SOM assumptions:

• Can you hire and ramp the sales team that fast?
• Does your CAC fit your runway?
• Does your price point sustain the business you want?
• Can your operations and onboarding support this volume?

Your spreadsheet is simply a dream, not a blueprint, if your assumptions don’t hold up in the real world.

Why Consistency Matters

Your market sizing, GTM, and sales projections must tell a single, consistent story.

• If your SOM suggests 50 deals/year and your sales forecast shows 200, there is a gap.
• If your GTM strategy requires enterprise sales cycles but your financial model assumes 2-month closes, there is a gap.
• If your SOM build shows $1.5M capacity and you pitch a $20M ARR growth plan in 12 months, there is a gap.

Boards and investors will notice these gaps. A strong board will challenge you to reconcile them to build a plan based on reality. Prospective investors might say nothing and just walk.

Final Thought

“Every great startup begins with a vision. But visions that ignore reality become hallucinations. Market sizing is where your dream meets the hard wall of execution.”

Calculate your market, not the market. Build bottom-up. Challenge every assumption because the market doesn’t care about your spreadsheet. It cares about whether you can win.

48-Hour Challenge

1. Rebuild your SOM calculation – bottom-up, line by line.

2. Stress test it: Is this plan possible with our current team, cash, and GTM?

3. Re-align your GTM strategy and financial projections to reflect what is achievable, not just desirable.

If you want your market sizing, GTM, and sales projections to become your company’s foundation for disciplined execution, not just a slide in your deck, Mir Meridian can help.