Every market-entry deck contains a slide with three nested circles or bars: TAM, SAM, SOM. The biggest number is the industry, the middle one is the segment, the smallest is what the company «realistically» expects to take. The arithmetic is usually sound. The use of the number is not: it is built to impress, not to decide — and a sizing that cannot change a decision is decoration.
The trouble with the big number is what people do with it. «The market is $40 billion; we need only 1%» is the classic formula, and it fails in two directions. First, the arithmetic flatters: nobody prices how expensive 1% of a dispersed market is to actually stand in front of. Second, the comparison hides structure: the market's total size says nothing about whether the part you can reach is worth having. Large markets attract competition, pricing pressure and consolidation; a smaller market that is reachable, underserved and durable is often worth more to an entrant than a giant one that is not.
There are two honest ways to size a market, and they answer different questions. Top-down starts from industry reports and narrows: it is fast, citable, and useful for one thing only — checking that the opportunity is not trivially small. Bottom-up starts from buyers: how many customers with this problem can you actually identify and reach, at what purchase frequency, at what price — in the segments where your current advantage gives you a right to win. The bottom-up number is smaller by an order of magnitude, sometimes two. It is also the only number that belongs in the decision: it prices what you can convert, not what the universe contains.
The question a sizing must answer is not «how big is this market?» It is «how much of it can we stand in front of, and what does the standing cost?»
A sizing earns its keep when it is built to be attacked. What evidence would cut this number in half — and how quickly can we find out whether that evidence exists? What share of the counted buyers have switching costs we cannot overcome? What is the smallest version of this market in which the entry still makes sense — the floor under which the plan dies? A sizing with a written floor and a written kill-condition changes decisions. A sizing with three nested circles changes nothing except the confidence of the meeting.
This is how we size markets before an entry decision — because the market-entry practice treats sizing as an input to the go/no-go, not a prop for it. And the sizing sits inside a larger question: what the entry strategy must prove before launch.
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