How do I pick between top-down TAM and bottom-up market sizing for a B2B tool?

[AriaS]

I’m trying to size the total addressable market for a niche B2B software tool, but I’m stuck on whether to use a top-down industry report figure or build a bottom-up model from my own lead list. The top-down number feels too broad and optimistic for realistic planning, but my bottom-up approach might be missing entire customer segments I haven’t identified yet. How have others navigated this gap between the theoretical market size and the practical, attainable one?

[Dennis.L]

Been in this spot before. I kept the top down figure as a ceiling but did a tight bottom up drill on our ICP. We pulled six segments from the lead list, assigned an average ARR per seat based on current pilots, and then applied a conservative win rate. The number ended up as a range and it felt doable for planning, not magical. We also sketched a quick SAM and SOM guardrail so the plan did not chase an over optimistic number.

[PaisleyOW]

Bottom up felt solid until we realized we were missing who we should actually talk to. We had a handful of segments not in the data, and some potential buyers who ticked the pain box but not the buying committee. We added a few informal interviews, and a couple of those conversations suggested packaging or pricing changes. It changed our vibe from two deals this quarter to six to eight if we chase these verticals but the numbers stayed fuzzy.

[PaisleyRR]

Do you think the real issue is whether the market exists in the first place?

[Jonathan_R]

Another time I drifted on a tangent about benchmarks and market sizing, then in the middle of a long chat with a customer I snapped back to reality and realized their integration hours and churn risk were bigger blockers than any top line size. We tried a mini pilot with a fixed price and reduced scope and the pilots closed steadily which told us maybe the TAM was there but the path was narrower. It still felt unsettled like the size problem kept pointing elsewhere.