When starting a business or launching a new product, understanding your market size is crucial. But what exactly is a market size assessment, and why does it matter? Let’s break it down into simple terms, so even if you’re new to the concept, you’ll get a solid grasp on what it is and how to do it.

A market size assessment helps you understand the potential demand for your product or service. It estimates how big your target market is, which directly influences your business strategy, pricing, marketing efforts, and even your potential for attracting investors. In simpler terms, it tells you how much money is up for grabs in your market. If you can get super clear on this, it will help you decide if the business idea you have is worth pursuing!

To accurately assess your market size, you’ll want to consider three key metrics: Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM).

Total Addressable Market (TAM) is the total revenue opportunity available if your product or service could cater to 100% of the market. Think of it as the universe of all potential customers.

Serviceable Available Market (SAM) is the segment of the TAM that your product or service can realistically serve. It’s the portion of the market that fits your specific business model.

Serviceable Obtainable Market (SOM) is the portion of your SAM that you can realistically capture, considering your competition, resources, and marketing capabilities.

Now, let’s break this down with a real-life example: Canva:

Canva’s TAM is the global digital design software market. According to industry reports, the graphic design software market was valued at approximately $45 billion in 2023 and is expected to continue growing as more businesses and individuals seek easy-to-use design tools. Canva’s SAM would be the subset of the graphic design market that prefers online, user-friendly design tools over traditional, complex software like Adobe Photoshop or Illustrator. This includes small businesses, marketers, content creators, educators, and non-design professionals. The SAM for online design tools like Canva is estimated to be around $15 billion, considering the growing preference for cloud-based solutions that are accessible and easy to use. Canva’s SOM is the portion of the SAM they have captured. With over 135 million active users across 190 countries and an estimated revenue of around $1.4 billion in 2022, Canva’s SOM could be conservatively estimated at around 5-10% of the SAM. This translates to approximately $750 million to $1.5 billion in revenue potential. By understanding their TAM, SAM, and SOM, Canva has been able to target specific user groups, refine their product features, and allocate resources effectively to maximize their market share.

How to Calculate Your Market Size Assessment

If you’re looking to calculate your own market size, there are several steps and tools you can use:

  1. Estimate Your TAM: Start by identifying the total market demand for your product or service. Research reports like those from IBISWorld, Statista, and Gartner are excellent resources to find current market data. These reports often provide insights into the size of industries, trends, and growth forecasts, giving you a solid foundation to estimate your TAM. Additionally, tools like Google Keyword Planner, SEMrush, and Ahrefs can help you understand what people are searching for online. By analyzing search volume and trends, you can gauge the demand for your product or service and refine your marketing strategy accordingly.

  2. Define Your SAM: Narrow down the TAM to focus on the segment of the market that is most relevant to your business. Consider factors like geography, customer demographics, and product features to define your SAM. This helps you focus on the market segment most relevant to your business.

  3. Determine Your SOM: Finally, assess the percentage of the SAM that you can capture, taking into account your competition and your own business capabilities. This involves analyzing market share, customer acquisition strategies, and how effectively you can scale your operations. This step helps you set realistic goals and strategies for capturing your target market.

At ideafloat, we simplify this entire process for you. With just a click of a button, we provide you with detailed market size assessments, leveraging the latest research data and advanced keyword analysis. Our platform allows you to quickly understand your TAM, SAM, and SOM, helping you make informed decisions and focus your efforts where they matter most.

By taking the time to understand your market size, you’re not just gathering data—you’re laying the foundation for a strong, competitive business that knows where it’s headed. And if you need help, we’re here to guide you every step of the way.