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I’m trying to size the total addressable market for a niche B2B software product, but I’m stuck on whether to use a top-down industry report figure or build a bottom-up model from my own lead data. The top-down number feels too broad for realistic market penetration, but my bottom-up approach might be missing entire customer segments. How have you all reconciled this gap in your own analyses?

Yeah we did that dance. I started with the top-down TAM from a big industry report and it looked huge, which made me hesitate to slice it too finely. Then we tried to ground it by mapping actual deals in the last 12 months and applying a share of those deals to the addressable segments. The ceiling from the top-down plus the floor from our pipeline gave a range that felt real enough to plan around, even if the match wasn’t perfect.

I did a bottom-up for our core ICP: number of customers, avg contract value, renewal rate, and expansion velocity. It lined up with what we were closing now, but we kept missing the niche players who rarely engage until late in the quarter. We added a field to track 'near misses' and realized those segments could be worth if we adapt the product slightly, but we never fully captured them in the model.

Hybrid feels best to me: use the top-down as a ceiling, bottom-up as a floor, and then layer in a couple of guardrails for segments that are hard to reach. It isn’t elegant, but it gave us something to test in scenarios.

Do you think the real bottleneck is the ICP or the TAM math itself? I’ve seen teams chase the wrong lever because the target segments are just not ready, even if the math adds up?

Today I caught myself daydreaming about coffee and channels and realized I was counting partners like they were customers. Then I forced myself to bring it back: TAM matters, but it needs to connect to how you actually reach buyers. Maybe the gap isn’t math at all, just how we’re talking to the market.

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