How to size a market in four minutes
Most growth plans die on arithmetic nobody did. Four crude numbers, multiplied on the back of an envelope, will tell you whether a segment can produce your target at all — before you spend a quarter finding out.
Here is a way to lose two quarters. Pick a plausible customer segment. Build a list. Write good outreach. Run it properly. Discover, in month five, that even if the campaign had worked perfectly it could not have produced the number you needed, because there were never enough companies in the segment paying enough money.
That failure is entirely preventable, and the prevention takes about four minutes. It is deliberately crude, and the crudeness is the point.
The four numbers
- How many companies in the world plausibly have this use case? Not could-be-sold-to in theory. Have the specific problem. Answer in powers of ten — 10³, 10⁴, 10⁵. Do not attempt precision.
- What share could you realistically reach and convert? 1%? 10%? Be pessimistic, and remember that reaching them is a separate problem from converting them.
- What do they pay per month?
- Multiply. Does it reach your goal?
Then apply the only rule that matters:
If it's not even within a power of 10 of what I want, then it's just not the answer. The numbers are just too small. Now, obviously we made up all those numbers and they're not exactly right. But if it's off by a whole power of ten, it's just wrong.
Jason Cohen
The made-up-ness is not a weakness of the method. It is what makes it fast enough to actually run. You are not forecasting; you are checking whether a plan is off by an order of magnitude — and a startling number of plans are.
What it looks like when it fails
In a live teardown of ScreenshotOne, a screenshot API doing $32k/month, this test was run three times against the founder's three best customer use cases.
Integration testing for hosting providers. How many companies host more than a hundred websites? Call it 10,000. What share could be convinced to rebuild their deploy pipeline around screenshots? The founder's optimistic answer was 10%; Cohen's was 1%. At $300/month, 1% is $30,000/month — against a $100,000 goal. Off by a factor of three at best, and that assumed the optimistic conversion.
Screenshots inside cold email. How many companies in the world would want this, ever? The founder's own estimate of the entire global market was about a thousand — smaller than his existing customer base. Dead on the first number.
Neither of those conclusions required a campaign. They required four minutes and the willingness to say a small number out loud.
What it looks like when it passes
The same test, run by Jesse Schoberg on DropInBlog's move into BigCommerce stores:
- BigCommerce has roughly 37,000 stores.
- About one in seven does over $400,000 a year — the ones with budget.
- Convert 5% of those.
- At the team plan: $40,000 MRR. At the business plan: $100,000 MRR.
Those are both respectable numbers that would move us to the next chapter.
Jesse Schoberg
That is what a segment looks like when the arithmetic clears. Note that it is not a big market — 37,000 companies is small. It does not need to be big. It needs to be big enough, reachable, and rich enough, which is a completely different test from the one most market-sizing decks run.
Reachable, not addressable
Which is the second half of this. The standard TAM slide answers how much money exists in this category — a number that is essentially never the constraint for a company doing outbound with a small team. Rob Walling's version replaces it with total reachable market: not how many could buy, but how many you can actually get in front of, with the channels and the budget you have.
The distinction matters because the two numbers can differ by three orders of magnitude. There may be four million small businesses who would benefit from your product. If your only channel is founder-led outreach and you can run forty real conversations a month, your reachable market this year is about five hundred companies. Every plan should be built against that number.
The practical consequence is counter-intuitive: a smaller, denser segment usually beats a larger, diffuse one, because reachability collapses with diffusion. Ten thousand companies who all attend the same two conferences, read the same newsletter and hire from each other are worth more than a million companies with nothing in common — the second group has a bigger TAM and a smaller TRM.
The version to run this week
Take the segment you are currently working, and fill in one row:
| Companies with this exact use case | 10^__ |
| Share you can reach in 12 months | ___ % |
| Share of those who convert | ___ % |
| Monthly price | $___ |
| = Monthly revenue if it all works | $______ |
Then ask the only question: is that within a power of ten of what you need?
If yes, the segment is viable and your problem is execution — go and execute.
If no, no amount of campaign quality will rescue it. You have three moves, and only three: raise the price, widen the segment, or pick a different one. Doing better outreach is not on the list, and doing better outreach is what most teams do for the next two quarters.
The value of this test is not that its numbers are right. It is that it is cheap enough to run before committing, and it reliably kills the plans that were never going to work — which is most of them.
Keep reading
- Personalisation that works, and personalisation that costs you trust Using someone's first name is not personalisation — and the people you most want to reach read it as proof that a machine sent the email. Here is the line between the two.
- The only prospects worth emailing this quarter Most lost deals were never deals. They were people who agreed the problem was real, took the meeting, and then went back to the two things their job actually depends on.
- What to say when everyone already knows the problem Naming a pain your prospect discusses openly proves nothing — they hear it from every vendor in the category. There are two deeper levels, and the third one is where deals are actually won.