Sanity-check a market size

A TAM slide, a forecast, or any big number in a deck you have to defend.

Check whether this market size estimate is plausible.

1. Rebuild it bottom-up and independently: number of potential buyers, times realistic spend each, times how many actually buy. Show your arithmetic.
2. Rebuild it top-down from a total you can anchor on, and narrow to the addressable slice.
3. Compare both with the figure I was given. If they differ by more than about 3x, find where the gap comes from.
4. Identify the assumption the estimate is most sensitive to, and show the answer if that assumption is half as good.
5. State clearly which of your inputs are reasonable public anchors and which are guesses. Do not present a guess with the same confidence as a known figure.

The claimed market size:


Context:

Testing a claim. Statistics, causal stories, methodology, and tracing a repeated claim back to where it started.