Bottoms-Up Market Sizing: A Framework for Entreprenuers

How to Create a Bottoms-Up Market Sizing Estimate

When starting a new business, launching a product, or pitching to investors, understanding market size is critical. A bottoms-up approach to market sizing tends to provide reliable, grounded estimates by building the market size from the ground up. Unlike a top-down approach that starts with broad metrics and narrows down, bottoms-up market sizing begins with detailed data and scales up, resulting in more precise, credible estimates.

What Is Bottom-Up Market Sizing?

Bottom-up market sizing involves calculating the market size using granular data such as number of potential customers, units sold, or transactions within a market. It focuses on measurable factors, making it a favored method for building investor confidence and informing go-to-market strategies.

Here you’ll learn some simple steps to create a bottom-up view of your market segments. Olympus Intel’s market-sizing platform takes pages from both bottom-up and top-down methods to give you the most robust view of your market segments possible. It's simple, fast, and affordable to get started today.

Building a Bottoms-Up Market Estimate

First, define your addressable units.

Identify the smallest building block of your market. These could be:

• Individual customers in a specific demographic.
• Businesses operating within a target industry.
• Units sold of a specific product category.

Let’s say you’re launching a communication and productivity software suite targeting construction companies. You consider charging for the software based on the number of users a company has or a flat subscription fee for each company. The number of addressable units we want to explore will be the number of firms or number of employees in the construction industry.

Quantify Total Units in the Market

Now with the addressable units known, we need data to estimate the number of units in the target market. This data could come from industry reports, publicly available estimates of population/business counts, trade associations, or any number of sources; quality varies by industry.

Using the Olympus Intel platform, you’ll quickly see the construction industry consists of ~700,000 firms and employs a little more than 8 million people. These are your total addressable units and building blocks for Total Addressable Market (TAM).

So, under the best theoretical circumstances, your software suite addresses a market of 700,000 firms or 8 million people.

Estimate Revenue Per Unit

TAM is expressed as a dollar amount. To go from units to TAM, we need to determine the average value per unit—in this case our 700,000 firms or 8 million employees.

The average value per unit can be estimated a few ways. The underlying questions that need answered are deceptively simple: how much will you charge for your solution, and how will you charge for it? For calculation purposes, it's straightforward. From a business operations standpoint, this is a critical decision point.

Olympus Intel’s market-sizing platform provides numerous ways to explore pricing options and revenue models, with both top-down and bottoms-up lenses. The Market Opportunity Simulator enables quick adjustments of market segments and exploration of various revenue models—from usage-based pricing to seat-based and more. You can seamlessly explore the impact pricing structures have on TAM in real time; no tough calculations or data crunching required.

Calculate TAM

Next, we need to calculate Total Addressable Market (TAM) by multiplying number of units by the revenue per unit.

In our construction example, assume two approaches:

• 700,000 firms × $99/month × 12 months = $831,600,000.
• 8,000,000 employees × $5/month × 12 months = $480,000,000.

Here, it looks more commercially lucrative to use “enterprise”-based pricing. For this post, we’ll continue assuming the enterprise approach. In a go-to-market study, it’s important to understand why the pricing models yield such different TAMs.

Refine for Serviceable Addressable and Obtainable Market Segments

Now that you have the best-case numbers, we need to create a realistic outlook of short- and medium-term market sizes. Serviceable Addressable Market (SAM) is the portion of TAM your product can actually service over the medium term. Serviceable Obtainable Market (SOM) is the slice of SAM you can realistically capture right now.

For example, beta testing the construction software showed businesses need at least 50 employees to benefit from the tools. While future versions will serve smaller companies, they won’t be available at launch.

You’ve also decided you will likely never pursue firms with fewer than 10 employees—for various reasons.

Lastly, because you’re just starting to go to market, you’ll focus exclusively on the West Coast. How do you apply that to a bottom-up model? Exclude firms with fewer than 50 employees from your SOM estimates, and exclude firms with fewer than 10 employees from both SAM and SOM. Limit SOM to West Coast states (CA, OR, WA), but keep SAM at a national level for future expansion.

The tools, resources, and time needed to combine all these components often put bottoms-up sizing out of reach for many founders. That’s why Olympus Intel’s platform makes it easier: as you toggle these constraints, SAM and SOM estimates update instantly.

In a crowded market or highly regulated space, or if you have your own adoption-rate estimates, our tool handles these considerations automatically.

The final result—after accounting for industry, pricing, employment filters, geographies, and other factors—looks like this:

Get started today and let Olympus Intel take the guesswork out of market sizing.

Why Use a Bottoms-Up Approach?

A bottoms-up market sizing approach stands out because it focuses on tangible, real-world data, offering a level of credibility and precision stakeholders trust. Relying on details such as specific customer segments or transaction volumes allows entrepreneurs to present defensible market estimates—key to building confidence with investors, partners, and internal teams.

Unlike top-down methods, which rely on assumptions from broader industry metrics, bottoms-up sizing ensures accuracy by building calculations from the ground up. This approach is especially valuable for niche markets, where macro-level data may not reflect your target audience’s true potential.

A bottoms-up methodology is also flexible and adapts to change. If you’re scaling, entering new regions, or exploring different pricing models, bottom-up estimates evolve alongside your strategy. It provides the granularity to adjust estimates as your business grows or market dynamics shift.

Common Challenges in Bottoms-Up Market Sizing

While a bottoms-up approach has clear advantages, it’s not without challenges:

• Data Availability: Finding and accessing granular, high-quality data is time-intensive and resource-draining. Public data sources may not provide the depth required, and industry reports often come at a high price.
• Estimating Revenue per Unit: Determining how much a customer or business will spend on your product requires thorough market research, beta feedback, or surveys. Without accurate pricing insights, TAM estimates risk being overly optimistic or too conservative.
• Scalability: Adjusting for multiple geographies, customer segments, or revenue models adds complexity. For example, understanding how adoption rates vary across regions or industries can complicate calculations—especially when data isn’t evenly distributed or readily available.

Addressing these challenges requires the right mix of tools and insights to simplify the process, ensure accuracy, and reduce manual data aggregation or analysis.

Wrapping Up

A bottoms-up market sizing estimate can be the strategic foundation for your business. Starting with real-world data and scaling upward, you can uncover opportunities, refine strategies, and communicate your market potential effectively to stakeholders. Though challenges like data availability or scalability can arise, having a structured approach and the right tools can help you navigate them with confidence.

Explore Pricing & Start Your First Market Model

Olympus Intel makes bottoms-up sizing accessible to everyone—from first-time entrepreneurs to seasoned founders. With tools designed to address data gaps, explore revenue models, and refine estimates in real time, you’ll gain actionable insights in minutes, not weeks.