Market sizing, top‑down and bottom‑up
Market sizing is estimating how big a market is, in units or dollars a year, from a few assumptions you state out loud. Top-down starts from a big total, such as 270 million US adults, and narrows it with shares. Bottom-up starts from one unit, such as one therapist's 960 massages a year, and multiplies by how many there are. Lead with one, check with the other, and explain the gap.
Updated
- Worked market
- US massage
- About $18 billion a year, reconciled
- B2B example
- Dental software
- About $380 million a year
- Free builder
- On this page
- Both routes side by side
- Worked questions
- 10 more
- In our market sizing questions
What market sizing is
Market sizing means estimating a number you can't look up, such as how much Americans spend on something in a year. It comes up in consulting case interviews, on its own or inside a bigger case, and in business plans as TAM, SAM and SOM. Either way it is a short chain of numbers, each stated so someone can challenge it.
Top-down vs bottom-up2 routes
Starts from
A big total, or one unit
Top-down starts from a total you can defend, such as adults, households or total spending, and narrows it with shares. Bottom-up starts from one unit, such as a store, a worker or a customer, and multiplies by how many there are.
Use it when
Your inputs are better on that side
Go top-down when the total is easy to find and the product is familiar. Go bottom-up when you can count the units that do the buying or selling, such as stores, workers or target customers, and the market is local or new.
Typical errors
Each route fails its own way
Top-down breaks on one share guessed too high, which carries through every step after it. Bottom-up breaks on a missing kind of seller, or on capacity assumed at its peak all year.
In a pitch deck
Investors use the words differently
To an investor, top-down is a share of a published industry total, and bottom-up is customers you can reach times what they pay. "1% of a $10 billion market" is easy to write and hard to believe, so build your own revenue bottom-up, from customers you can reach.
The market sizing formula2 forms
Every market size is a short product of counts and rates. Write the formula before any number, then fill one part at a time.
From buyers
Buyers x units each x price
Market size a year = people or businesses who buy, times how many units each buys in a year, times the price of one unit. Narrow the buyers with shares only where you can give a reason.
From sellers
Sellers x capacity x how full x price
Market size a year = stores, workers or machines, times what one can sell at full stretch, times how busy it really runs, times the price.
In dollars or units
Drop the price for units
Units a year is the same chain without the price. Say which one you are giving before you start.
For a business plan
Then narrow to TAM, SAM, SOM
The formula gives the whole market, the TAM. The layers below it are shares of that answer, shown at the end of this section.
Worked example: top-down4 steps
Estimate the US market for professional massage, in dollars a year. Count paid sessions at spas, studios, clinics and in homes, not massage chairs.
Adults
About 270 million
Census puts the US at 341,784,857 people on July 1, 2025, with 21.1% under 18. That leaves 269.7 million adults, rounded to 270 million.
Clients
54 million
Assumption: 20% of adults pay for at least one massage in a year. 270 million times 20% is 54 million.
Massages
216 million
Assumption: 4 a year per client, on average. 54 million times 4.
Spending
About $19 billion a year
Assumption: $90 a massage, before tip. 216 million times $90 is $19.44 billion.
Worked example: bottom-up4 steps
The same market built up from one unit, here the therapist who gives the massage.
Therapists
About 150,000
BLS counts 155,400 massage therapist jobs in 2025, and says part-time work is common and many are self-employed. Round down to 150,000 for easy math.
Per therapist
960 massages a year
Assumption: 20 a week, about four a day, over 48 working weeks.
Massages
144 million
150,000 times 960.
Spending
About $13 billion a year
Same $90 assumption. 144 million times $90 is $12.96 billion.
Reconcile the two answers5 steps
Top-down says $19 billion, bottom-up says $13 billion. Don't split the difference. Test the weakest input on each side.
Compare
Top-down is 1.5 times bottom-up
Both use $90, so the whole gap is volume: 216 million massages wanted against 144 million given, a gap of 72 million.
Test top-down
30 massages a week each
For 216 million massages, each of the 150,000 jobs would give 30 a week, 6 a day. BLS notes many therapists can't give massages 8 hours a day, 5 days a week, so 6 a day from every job, part-timers included, is too many. Yet trim visits to 3 a year and demand is still 162 million, above 144 million.
Test bottom-up
150,000 is a floor
144 million massages at 4 a year is only 36 million clients, about 13% of adults. And BLS counts jobs where massage is the main job. It misses massages in chiropractic and physical therapy offices, from spa staff with other job titles, and from people who give them on the side.
Fix one input
About 200,000 people give massages
Assumption: people outside the BLS count add a third, one for every three it counts. 200,000 times 960 is 192 million massages, or $17.28 billion. Top-down now needs 22.5 a week from each, close to the 20 assumed.
Answer
About $18 billion a year
Top-down's $19.44 billion is now 12.5% above bottom-up's $17.28 billion. Say $17 billion to $19 billion, call it $18 billion, and name the next check: how many massages come from outside the BLS count.
Worked example: a B2B market4 steps
Estimate what US dental offices spend a year on practice software for scheduling, charts and billing. Business markets start from a count of the buyers.
Dentists
About 160,000
BLS counts 161,400 dentist jobs in 2025. Round down to 160,000.
Offices
About 80,000
Assumption: 2 dentists an office on average, solo offices and group practices together. 160,000 / 2 is 80,000.
Spending
About $380 million a year
Assumption: $400 a month an office. 80,000 x $400 x 12 is $384,000,000.
Sanity check
About 1.4% of a dentist's pay
That is $2,400 a dentist a year. BLS puts median pay at $176,110, so software costs about 1.4% of it. Small enough that an office would pay it, so the price is plausible.
TAM, SAM and SOM, same market3 layers
Say a new app books in-home massages in 10 metro areas. The three layers narrow the market to what it could win.
TAM
$18 billion
Total addressable market: all US spending on professional massage, the answer above.
SAM
About $1.4 billion
Serviceable available market: the part the app can serve. Assumptions: its metro areas hold 30% of spending, and 25% of their clients would book a massage at home. $18 billion times 30% times 25% is $1.35 billion.
SOM
About $70 million
Serviceable obtainable market: what it can win in about three years. Assumption: 5% of SAM, or $67.5 million. That is bookings. The app's revenue is its cut, say 20 to 25%, or about $14 million to $17 million.
Check the SOM
About 1,000 therapists
Travel cuts how many massages an in-home therapist fits in. Say 15 a week for 48 weeks at $90, or $64,800 a year. So $67.5 million in bookings needs about 1,000 full-time therapists on the app. If the plan can't recruit that many, the SOM is too high.
From U.S. Census Bureau QuickFacts, the BLS Occupational Outlook Handbook (massage therapists) and the BLS Occupational Outlook Handbook (dentists).
Build a market top-down and bottom-up
Pick a market, change any assumption and see how far apart the two routes land and what the gap means. Free, runs in your browser.
Seven markets from our worked interview questions, or one of your own. Each starts from the worked answer's numbers, and any line we added ourselves is tagged as our assumption.
Estimate the annual market for electric scooters in the United States.
Lines without a tag come from our worked answer. Lines tagged as our assumption are round numbers we picked for this builder. Change any of them. Read the worked answer
Change any number. Each line shows where the chain stands after it.
Top-down
Start from households where a scooter is practical and narrow to owners.
About 30% of 130 million US households
- = 2 million owners
- = 500,000 scooters bought a year
200,000 shared scooters that last about two years
= 600,000 scooters sold a year- = $300 million a year
Bottom-up
Start from the stores that sell scooters and scale up.
Our assumption, change it
Big-box, electronics and bike shops
Our assumption, change it
= 300,000 scooters sold in storesOur assumption, change it
The rest are bought online
= 600,000 consumer scooters a year- = 700,000 scooters sold a year
- = $350 million a year
Gap: 17%
The routes are 17% apart: close enough for a range.
Give both ends as your range, then name the input you trust least.
Sanity check
2 million owners is under 1% of the roughly 260 million US adults. Does that fit what you see in a big city, and in the suburbs?
Say your estimate out loud to an AI interviewer
Building it on a page is half the skill. Soreno's AI interviewer gives you a sizing question, asks why you picked each number and scores how you got there. The 7-day free trial includes 6 practice credits (a full case uses up to 3) and 3 drills.
Practice with the AI interviewerAccount required to start the trial. Cancel anytime before it ends.
Common market sizing mistakes
Four slips interviewers mark down.
Shares stacked on shares
Five percentages in a row, each a guess, multiply into an answer nobody can check. Keep the chain short and give every share a reason.
Averaging away a gap
When the routes land far apart, splitting the difference hides the input that is wrong. Test the weakest input on each side, fix it, then give a range.
False precision
$19.44 billion sounds sure and isn't. Say about $19 billion, and give a range when the inputs are soft.
TAM when they asked for SOM
"How big is the market?" and "How much could we sell?" are different questions. Ask which one before you start.
A market sizing framework in 7 steps
The same steps work for an interview question and for the market slide in a business plan.
1. Clarify
Pin down what you are sizing
Units or dollars, a year or a day, which country, and what counts. For massage: paid sessions only, not massage chairs or home gadgets.
2. Choose the route
Lead with the side you trust more
The buyers (people, households, companies) or the sellers (stores, workers, machines). Say which and why before you give a number.
3. Segment
Split only where behavior differs
Two or three groups at most: regulars and occasional clients, small and large dogs, homes and offices. More groups means more guesses.
4. Assume
One round number at a time
Keep anchors apart from guesses. "About 270 million adults" is an anchor you can state. "20% get a massage" is a guess you defend, and "twice a year for occasional clients, since many get one as a gift" beats a bare 2.
5. Compute
Out loud, with units
Say each step as you go and round as you go: "54 million clients times 4 is 216 million massages." A bare "216" hides a slipped zero.
Free case math drills6. Sanity-check
Rebuild it another way
Run the other route, or shrink the answer to one buyer or one seller. A gap like 1.5 times means an input is off, so test the weakest one on each side before you average.
How to sanity-check an estimate7. What would change it
Name the input that moves it most
End with the number, a range and the assumption you'd check first. For massage that is the givers outside the BLS count: with none, bottom-up is $13 billion, and with a third more it is $17 billion.
6 market sizing questions to practice
The note under each says what a strong answer does first. Ten more, solved step by step, are in our market sizing questions article.
Size a market or a count
Units, dollars or people a year, for the whole country.
Estimate the annual US market for electric scooters.
Say what counts first. Consumers and rental fleets buy for different reasons, so size them apart. Practice it, see a model answer
Estimate the annual US market for dog food.
Split the dogs by size, since a large dog eats several times what a small one does. Practice it, see a model answer
How many dentists are there in the United States?
Visits by patient group, regulars to people who skip a year, then the visits one dentist can cover. Practice it, see a model answer
Size one business
Capacity often caps the answer.
How much revenue does a coffee shop in a busy airport terminal make in a day?
There's a line most of the day, so size it by how fast the shop can serve, not by how many want coffee. Practice it, see a model answer
Questions about the method
Some interviewers ask about the approach itself.
Would you size a market top-down or bottom-up, and how do you choose?
Pick the route with better inputs and run the other as a test. Show it on one small market. Practice it, see a model answer
You have a number for your market size. How do you check that it is reasonable?
Shrink it to one household, rebuild it by another route and hold it against a ceiling it can't pass. Practice it, see a model answer
Size a market out loud, with pushback
Soreno's AI interviewer asks a market sizing question, pushes on your assumptions, checks your math and scores the session. Try it free.
Questions people ask
What is market sizing?
Estimating how big a market is, in units or dollars over a set time, from a few stated assumptions. Consultants, founders and investors use it to judge whether a market is worth going after.
What is top-down market sizing?
Starting from a large total you can defend, such as adults or households, and narrowing it with shares until you reach buyers and what they spend. In the example above: 270 million adults, 20% of them clients, 4 massages each, $90 each.
What is bottom-up market sizing?
Starting from one unit, such as a store, a worker or a customer, working out what it sells, and multiplying by how many units there are. In the example above: 150,000 therapists plus a third more outside the BLS count, 960 massages each a year, $90 each.
Top-down vs bottom-up: which is better?
Neither on its own. Lead with the route whose inputs you trust more, then use the other as a check. A big gap between them points at the input to fix, and it can sit on either side.
Is there a market sizing framework?
Yes, a short one: clarify, choose the route, segment, state assumptions, compute out loud, sanity-check, and say what would change the answer. Adapt the segments to the market in front of you.
What is the market sizing formula?
Market size a year = buyers, times units each buys a year, times the price per unit. From the supply side it is sellers, times what one can sell, times how busy it runs, times the price.
What are some market sizing examples?
This page sizes US massage both ways and a B2B market for dental office software. Our market sizing questions article works ten more, from gas stations to McDonald's sales in New York City.
What are TAM, SAM and SOM?
TAM is the whole market, SAM is the part your product and regions can serve, and SOM is the share you can realistically win in the next few years. Each layer narrows the one above it.
Do I need to memorize statistics?
Only a few anchors. Census counts about 340 million people and about 130 million households in the US. Everything else you can reason out and state as an assumption.