The importance of accurate market sizing

An accurate understanding of your market size not only helps investors understand the long-term potential of your idea, it gives you a significant competitive advantage. In the age of authenticity, deeply understanding the specific size and type of your serviceable customer paves the way for all strategic decisions.

The time spent in figuring it out pays off ten-fold: 1. Your investors get a clear picture that this market is worth going after (as well as a snapshot into the discipline of your team) and 2: You avoid making the same mistakes as companies like Blockbuster, Kodak, and Sears.

Tx Zhuo provides an excellent overview of the difference between total addressable market (TAM) and serviceable available market (SAM) in 5 Strategies to Effectively Determine Your Market Size:

Understanding market size helps you distinguish between two categories: the addressable market, which is the total revenue opportunity for your product or service; and the available market, which is the portion of the addressable market for which you can realistically compete. By outlining the difference between these two, you can develop a product offering to tackle that consumer sweet spot.

The market size slide in your pitch deck

The market size slide is where you communicate to your potential investors the real addressable market for your startup. Its purpose is to give an estimate of the market percentage you hope to dominate. Sounds easy, right? Interestingly enough, it tends to be one of the more difficult slides to put together and startups are frequently guilty of over-exaggeration. VentureBeat cites third-party data as a primary culprit and suggest preparing both top-down and bottoms-up analyses when putting your pitch together.

So how do you determine the size of your target market?

In the lesson below by tutor2u, Graham Prior explains the key concepts of calculating and interpreting market size, market growth and market share.

Check out these decks from funded startups to see different ways to show your market size