Serviceable Available Market

Market size conversations open with the largest number available. "The collaborative document market is worth $2.3 billion" sounds substantial and decides nothing.

Grace put that $2.3 billion on the first slide of a fundraising deck and got one question back: how much of it can you sell to right now? There was no prepared answer. Pagedeck at that point ran in a web browser only, accepted domestic card payments only, and had a sales team that contacted software companies only. Most of the companies inside that $2.3 billion failed at least one of those three conditions. Answering the question requires a separate name for the market you can serve today.

Filter down to the customers today's product and channels can reach, then multiply that customer count by what one customer pays per year.

1. Write down the constraints doing the filtering: a product constraint (browser only), a payment constraint (domestic cards), and a channel constraint (sales talks to software companies). Constraints you plan to lift still count while they're in place.
2. Count the customers left. In this case, 12,000 domestic software companies with 30 to 200 employees. Take that count from statistics or a company register rather than guessing at it.
3. Work out annual revenue per customer. Forty seats per company at $90 per seat per year comes to $3,600. With few signed contracts to go on, multiply average revenue per user (ARPU) by the seat count instead.
4. Multiply the two. 12,000 companies at $3,600 gives $43 million, and that figure is the SAM.
5. Keep the top-down version — a percentage of the whole market — for checking only. "Two percent of $2.3 billion" can't explain where the two percent came from, while noticing that the $43 million you built up is 1.9 percent of the total confirms the order of magnitude.
6. Record the assumptions next to the number. Without a source for the company count and a basis for the average seat count, nobody revising this in six months knows which input to change.

"Fine, the total market is $2.3 billion. What's the SAM?"

Asking for the range you can sell into rather than the outer number.

"Opening payments to international cards doubles our SAM."

Costing out how much wider the reachable market gets if one constraint is lifted.

"That figure counts companies and never multiplies by price."

Market size needs both the customer count and the money, and only one was counted.

Grace and Mia recalculated this while deciding whether to build a mobile app. Dropping the browser-only constraint raised the target count to 19,000 companies and the SAM to $68 million. Whether the extra $25 million justified six months of engineering became the question in the room, and market size only supplied one side of it.