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Sanity-check a market size

A TAM slide, a forecast, or any big number in a deck you have to defend.

Longmarketestimationnumbers
Check whether this market size estimate is plausible.

1. Rebuild it bottom-up and independently: number of potential buyers, times realistic spend each, times how many actually buy. Show your arithmetic.
2. Rebuild it top-down from a total you can anchor on, and narrow to the addressable slice.
3. Compare both with the figure I was given. If they differ by more than about 3x, find where the gap comes from.
4. Identify the assumption the estimate is most sensitive to, and show the answer if that assumption is half as good.
5. State clearly which of your inputs are reasonable public anchors and which are guesses. Do not present a guess with the same confidence as a known figure.

The claimed market size:


Context:

Making it yours

  • Paste your own material where the prompt asks for it. Everything above that line is instruction, not content.
  • Delete any rule that does not apply to you. A shorter prompt that fits beats a thorough one that does not.
  • If the answer comes back vague, add a line saying what you do not want. Constraints work better than encouragement.

Testing a claim. Statistics, causal stories, methodology, and tracing a repeated claim back to where it started.

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