Assumption Type
Market Size: Is Your Market Real or a Spreadsheet Fantasy?
Your TAM slide is a math exercise. Your real market is the number of people who will actually pull out their wallet.
What is the market size assumption?
Market size is the assumption that enough people have the problem you're solving, care enough to seek a solution, and are willing to pay enough to make your business viable. The gap between 'total addressable market' on a slide deck and 'people who will actually buy' is enormous.
Why founders get this wrong
Founders calculate market size top-down: '$50B market × 1% = $500M opportunity.' But markets don't work that way. The real market is bottom-up: how many specific people have this problem acutely enough to pay your price? Top-down sizing is useful for investor slides. Bottom-up sizing is useful for building a business.
Signs you're making this assumption
- Your market size is a top-down calculation from an analyst report, not from talking to potential customers
- You can describe your market in millions of people but can't name 50 specific potential customers
- Your TAM includes people who have the problem but would never pay for a solution
- You're citing a market report but haven't verified the segments actually exist as described
- Your business model requires capturing a percentage of a large market, but you can't describe how you'd reach even 100 customers
How to actually test market size
Bottom-up: can you manually find and list 100 specific people or companies who would buy? If you can't find 100 by hand, the market is smaller than you think.
Test acquisition channels: where do these people gather? Can you reach them affordably? If you can't find them, the market effectively doesn't exist for you.
Ask about spending patterns: 'How much does your company spend on solving this problem today?' If the answer is $0, you're creating a market, not entering one.
Look at search volume for your problem keywords. Low search volume = low active demand (people don't search for problems they don't know they have).
Run a Validue campaign testing how acutely your target segment feels the problem and what they currently spend to address it.
The one question that exposes this assumption
“Can you name 10 specific companies or people — by name — who you believe would buy this in the next 90 days? Why each of them?”
Industries where market size is most dangerous
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