How to Size a Market Bottom Up, Not From a Report

To size a market bottom up, count how many organisations of your target type exist, estimate what each would plausibly pay, and multiply, showing every step. It produces a smaller figure than an industry report, and a far more believable one, because it shows you know who actually buys.

Almost every deck has a market slide, and almost every market slide has the same shape: a very large global number, then a small assumed share of it. Experienced readers have seen that slide so often that they no longer register it as information. The bottom up version is different. It is a piece of reasoning rather than a quotation, and reasoning is something an investor can test. This post walks through how to build it and how to defend it.

How to size a market bottom up, step by step

The method has three moves, and the order matters. Each one narrows the question until it is something you could actually go and check.

1. Define the buyer: the specific type of organisation or person who would write the cheque.
2. Count them: how many of that type exist in the places you could realistically serve.
3. Price them: what each would plausibly pay in a year, and why.

Multiply the count by the price and you have a market. The point is not the product of the two numbers. The point is that every input is something you can explain, and so every input can be challenged and improved. A top down figure offers nothing to challenge, which is exactly why it is not believed.

Start with the buyer, because it determines everything else. If you cannot say who pays, you cannot count them. This is the same specificity that makes a good one sentence pitch: a customer narrow enough to picture is also narrow enough to count.

Why top down sizing is not believed

Top down sizing begins with a large global figure for an industry, then assumes that your company will win a small share. The logic sounds modest, but it carries three problems that anyone experienced will spot.

First, the large figure usually describes a category far wider than the thing you sell. It includes customers you cannot reach, products you do not make and regions you will not enter. Second, the small share is a guess dressed as a conservative one, and it is not connected to any plan for winning customers. Third, and most damaging, the method tells the reader nothing about whether you understand the buyer.

Investors read the market slide partly as a test of thinking. A founder who reaches for an industry report has shown that the question was answered by looking something up. A founder who built the figure from the ground has shown that they have been thinking about who picks up the phone.

	Top down	Bottom up
Starting point	A published figure for a wide category.	A count of specific buyers.
Key assumption	A small share of the total.	A realistic price per buyer.
Size of result	Very large.	Smaller, and honest.
What it shows	That a report exists.	That you know your customer.
Survives the follow up question	Rarely.	Yes, because the steps are visible.

Defining the buyer tightly

Most mistakes in a bottom up estimate happen at the first step. The buyer is defined too loosely, so the count comes out too high.

A useful discipline is to define the buyer by the characteristics that decide whether they could be a customer today. That might be the size of the organisation, the role of the person who signs, the tools they already use, or the country whose rules apply. Each filter removes people who would never buy, and the count that remains is the one you can honestly claim.

It is worth separating three groups, because they are often blurred.

• Organisations that have the problem.
• Organisations that have the problem and would pay to solve it.
• Organisations that have the problem, would pay, and that you could realistically reach.

The first group is the one top down numbers describe. The third is the one an investor wants. You can show all three on the slide, or keep the first two in the appendix, but the figure you lead with should be built from the last.

Counting without a report

Founders often assume that counting requires a database they cannot afford. Usually it does not. There are many ordinary ways to estimate how many buyers of a given kind exist.

• Public registers and directories that list organisations by type and location.
• Membership lists of trade bodies and associations.
• The customer list of an existing product in the same space, as far as it is public.
• Your own pipeline, sampled: of the first set of organisations you approached, how many fitted the definition?

The last of these is the most persuasive, because it comes from your own contact with the market. If you can say that you went through a list and checked each entry against your definition, you have turned an estimate into a piece of work. A rough count that you did yourself carries more weight than a precise count you cannot explain.

Be honest about uncertainty. A range is acceptable if you say where the range comes from. A single figure that hides a wide swing is less trustworthy than a pair of figures with the reason for the gap.

Pricing what each buyer would pay

The price step is where optimism creeps in. The honest anchor is something observed, not something hoped for.

If you have customers, use what they actually pay. If you have none, use what the buyer currently spends to solve the problem some other way, and ask whether you would be priced as a replacement for that, a supplement to it or something new with no reference point. Each leads to a different, defensible number. A price pulled from the air is not defensible.

State the unit of the price as well. A figure per month, per seat, per transaction or per year changes the arithmetic enormously, and mixing them is a common source of error. Choose the unit that matches how the customer actually pays, and keep it consistent throughout the slide. The same attention to definitions applies to your results, which is the theme of how to make an honest traction slide.

Showing the arithmetic

The calculation belongs on the slide, or in the appendix with the slide pointing to it. What matters is that it is visible and that you can walk through it aloud without notes.

A clean layout is a line for each input: the buyer definition, the count and where it came from, the annual price and why, and the total. Four lines are enough. If the slide needs more than that to make sense, the logic is probably too tangled to survive a conversation.

Then rehearse the walk through. The obvious follow up question is where the figure came from, and the answer should be immediate and specific. Being able to say "we counted these, checked this sample, and priced it from this evidence" is the strongest thing the slide can do. It also tells the investor something they care about, which is whether your reasoning holds when pushed.

What to do when the number is small

Bottom up sizing sometimes produces a figure that feels disappointing next to a global industry number. That feeling is the reason many founders retreat to the top down version. Resist it, for two reasons.

First, a small honest figure can be extended honestly. You can show the adjacent buyers you would reach next, the reasoning for moving into them and the order in which it would happen. That sequence is a story about growth, built on something real. A huge top down number has nowhere to go because it is already as large as it can be.

Second, if the number is truly too small for the kind of investor you are approaching, you want to learn that early. A market that cannot support venture scale returns is a fit problem, not a presentation problem, and no slide will fix it. Finding that out from your own arithmetic is cheaper than finding it from a dozen refusals, which is the kind of pattern described in why investors say no to a pitch.

Frequently asked questions

Should I include an industry report figure at all?

You can mention it as context, clearly labelled, but do not build the argument on it. Lead with the figure you constructed, and let any wider number sit beside it as background.

How precise does the count need to be?

Precise enough that you can explain it. A reasoned range with its source is better than a falsely exact total. What matters is that each step is visible and open to challenge.

What if my product has not been priced yet?

Anchor on what the buyer spends today to solve the problem, and say how you would compare to that. State that the price is an assumption you intend to test, and say how you will test it.

Where should the arithmetic sit in the deck?

Put the short version on the market slide and the full workings in the appendix. Be ready to walk through it aloud, since it is the first thing an investor is likely to ask about.

The full method, with the checklists, is in The Pitch Playbook, a free 34-page playbook.