If you’re fine tuning a pitch deck make sure to check out our how-to on pitch decks, but today we’re focusing on a key slide that’s probably got you asking…

What do I need in my pitch deck or presentation when a potential investor asks “what is your market size?” 

Market size basically just refers to the amount of revenue (sales) you believe you can reach based on how many likely buyers there are within a certain segment.

While every business is unique, there is a basic formula to follow for calculating market size. We’re going to break it down so you can look and sound like an expert when making your pitch.

Ready to dive in? Let’s take some jargon and make it simple…

Total Available Market (TAM) refers to the total size of the market that your product(s) or service(s) are part of, for example the $532B beauty industry.

Serviceable Available Market (SAM) is inside of TAM, and is the part of the market targeted by your products and services (in some cases limited by geographic location), like the $94B cosmetics market.

Serviceable Obtainable Market (SOM) is the share of SAM that you believe you can capture.

In general, you’ll want to learn as much as possible about the bigger market opportunity. But you should be prepared, especially, to talk through the SAM and SOM and why you’re the right person and/or team to build a company in the area.

For example, the team slide on your presentation might include details on you, your co-founder or a key team member who has 10 years of experience in retail or merchandising cosmetics for women of color. Being able to talk about the challenges and opportunities of a market segment gives you credibility.

There are a couple of different ways to calculate your estimated market share aka SOM.

A good way to do it is by estimating potential sales so you end up with a credible number, avoiding the standard “5 percent of a $5 billion market is $250 million!” sales forecast.

For example, let’s say you have a small but growing cosmetics business that’s focused on organic skincare in the Atlanta market. The population of Atlanta is ~5.8M, of which 51.5% consists of women, who make the majority of cosmetics purchases. That’s 2,987,000 individuals.

Let’s say you believe you can capture 6% of group, they use makeup on at least a weekly basis, and you know their average monthly spend is $35.

With that in mind, you’ll get a maximum revenue per month of $35 x 119,480 people = $4,181,800 or annual revenue of $50,181,600. That’s your SOM. Of course you’re still going to have to present some evidence of how you plan to market to and build customer relationships in that group, but being able to share your numbers is the first step.

The good news is that it’s not as hard as you might think to find those TAM and SAM market numbers to begin with.

Most of the time you can pick out the basics of TAM and SAM by looking for research companies that release data and reports.

To start, try googling “[keyword] market size” to see what comes up. For example, if you search for “creative services market size” you will see data from a few sources and you’ll notice it has the TAM as well as some sub-markets that could be SAM.

Often you’ll have to get crafty in the way you’re searching, try a bunch of variations, see how things are named. Usually you’ll get a big TAM and then a bunch of SAMs, with their own area of focus. If you see names like Grandview, Statista, Ibisworld, Lexis, etc. you’ll know you are in the right neighborhood.

Then, dig deep to see what the statistics are like for your SOM. This is a little harder, so it’s a good idea to talk with a mentor or advisor who is knowledgeable about your industry to make sure you’ve identified the most compelling data.

If you need help, sign-up for the Ureeka Community! All members have access to the “Find A Mentor” feature where we’ll match you with an expert for a quick (and free) 1:1 conversation. Plus, the Essential Series and coaching options can help you nail your market positioning, increase customers and grow your business.

Last but not least, make sure to think of the answer to “what’s your market size” as part of the bigger narrative of your business pitch.

A good pitch does more than convince an investor to consider putting money in, it shows the mechanics and structure of how you will go after the opportunity.