You’re sitting in a glass-walled conference room or maybe staring at a Zoom grid, and someone—usually a partner at a firm like McKinsey or a stressed-out VC—drops the bomb. "How many tennis balls fit in a Boeing 747?" or "What’s the annual market for gluten-free dog treats in London?"
It’s a "guesstimate" question. You don't need the exact decimal point. What you need is a market sizing cheat sheet that actually lives in your head, not just on a PDF.
Most people panic. They start throwing out random millions or billions because those numbers sound "businessy." That's a mistake. Market sizing isn't about being right; it's about being logical. You're building a house. If your foundation—the assumptions—is shaky, the whole roof is coming down.
The Mental Math That Saves Your Life
Let’s get real. Nobody expects you to know the population of every city on earth. But you should probably know that the US has roughly 330 million people. If you start a market sizing exercise for a US-based app and you assume there are 1 billion Americans, you've already lost the room.
Basically, you need an anchor.
Think of the "Rule of 100." If you're looking at a niche market, start with 100 million as a mental baseline for the US population (rounding down for easier math) and segment from there. Roughly 80 million households in the US have dogs. About 25% of the population is under 18. These aren't just trivia points. They are the scaffolding for your market sizing cheat sheet.
When I’m looking at a market, I usually start with the TAM. That’s your Total Addressable Market. It’s the "dream big" number. If every single person who could possibly use your product actually bought it, how much would that be? It’s almost always a lie, but it’s a useful lie because it sets the ceiling.
Forget the Formulas, Focus on the Layers
Most textbooks tell you to use "Top-Down" or "Bottom-Up" modeling. Honestly, top-down is usually garbage for startups. It’s too easy. You take a $20 billion market and say, "If we just get 1%, we’re rich!"
Venture capitalists hate that. It shows you don't understand how customer acquisition actually works.
Instead, lean into the bottom-up approach. It’s harder. It’s grittier. You start with the price of one unit and multiply it by the number of people you can actually reach.
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Breaking down the segments
Let’s look at an illustrative example: A new high-end coffee machine.
- How many households earn over $100k? (Maybe 30 million in the US).
- How many of those are "coffee enthusiasts"? (Let's guess 40%).
- How often do they replace a machine? (Every 5 years).
Now you’re cooking. You aren't just guessing; you’re calculating.
The Cheat Sheet of "Standard" Numbers
You need these burned into your brain.
The US population is about 330 million. Life expectancy is roughly 80 years. This means there are roughly 4 million people in every age year (0, 1, 2... up to 80). If you need to size a market for 5-year-olds, you do 4 million times one. Simple.
There are about 130 million households in the US. Average household size? About 2.5 people.
If you're looking at Western Europe, the big four (Germany, UK, France, Italy) have between 60 and 80 million people each.
These numbers are the "constants" in your personal market sizing cheat sheet. Without them, you're just a person with a calculator and no clue.
Why the SAM and SOM Matter More
TAM is the vanity metric. SAM (Serviceable Addressable Market) is the reality check. It’s the portion of the TAM that fits your geography and your specific product type.
Then there’s the SOM (Serviceable Obtainable Market). This is the "what can we actually do in the next three years" number. If your SOM is $5 million and you’re asking for a $50 million investment, you’re going to get laughed out of the building.
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The Precision Trap
Don’t use 3.14159 if 3 works. Seriously.
In a live interview or a pitch, nobody cares if you're off by 5%. They care if you're off by a factor of ten (an "order of magnitude"). If you say the market is $100 million and it's actually $1 billion, you have a fundamental misunderstanding of the industry.
The goal of a market sizing cheat sheet is to keep you within the right "zip code" of the truth.
I once saw a guy try to calculate the market for smartphone screen protectors by estimating the square footage of all glass produced globally. It was insane. He got lost in the weeds. Don't be that guy. Just look at the number of smartphones sold per year.
Real World Nuance: The Replacement Cycle
One thing people always forget in market sizing is the "replacement cycle."
If you’re selling refrigerators, your market isn't everyone with a kitchen. It’s everyone with a kitchen whose fridge just broke. If a fridge lasts 10 years, only 10% of the households are "in-market" at any given time.
This is where most amateur analysts fail. They calculate the total stock (the "installed base") but forget to calculate the annual flow.
For a market sizing cheat sheet to be effective, you have to distinguish between:
- Total Stock: How many exist right now.
- Annual Flow: How many are bought each year.
Proxies: The Secret Weapon
What if you’re sizing a market for something that doesn't exist yet? You use a proxy.
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If you’re sizing the market for a new type of electric scooter insurance, you look at electric scooter sales. If you’re looking at the market for a new vegan egg substitute, you look at the sales of high-end organic eggs.
You find a "neighbor" industry that is already well-documented and you bridge the gap with a logical assumption. "We think 10% of organic egg buyers will switch to our product because of X reason."
Actionable Steps for Your Next Sizing Task
Stop looking for a magic table that gives you all the answers. Markets change too fast for that. Instead, follow this workflow to build your own logic on the fly:
Step 1: Identify the Unit of Sale. Is it a subscription? A one-time purchase? A per-use fee? This dictates your entire math structure.
Step 2: Define your "Anchor Population." Is it people, households, businesses, or cars? Use your "standard numbers" (330M people, 130M households) to get your starting point.
Step 3: Apply the "Funnel of Reality." Start with the big number and aggressively cut it down using filters like Geography, Income, Age, and Interest.
Step 4: The Sanity Check. Does your final number make sense? If you’ve sized the market for a new brand of premium bottled water at $500 billion, and the total global bottled water market is only $300 billion, you’ve messed up somewhere. Go back and find the leak in your logic.
Step 5: Document your assumptions. If you assumed 20% of people will pay a premium, say that. It’s okay to be wrong about the 20%, as long as you can explain why you chose it.
Market sizing isn't a math test. It’s a logic test. Use your market sizing cheat sheet as a guide for your thinking, not a source of "perfect" data. Focus on the drivers—the "why" behind the numbers—and the "what" will usually take care of itself. Keep your math simple, your assumptions bold but defensible, and always, always keep your anchor numbers in your back pocket. This approach turns a terrifying guesstimate into a structured conversation that proves you actually understand how the world works.
Next time you’re asked to size a market, don't reach for Google first. Reach for a pen and start with the population. Work your way down. You'll be surprised how close you can get to the truth just by thinking clearly.
Check the math one last time. If it feels right, it probably is. If it feels like a fairy tale, it definitely is. Be the person who brings the data back to earth. That’s where the real business happens.