Enter your market assumptions
Example data table
| Area | Population | Target Fit % | Reach % | Avg. Order Value | Projected SOM Revenue |
|---|---|---|---|---|---|
| Downtown Core | 28,000 | 42% | 68% | $52.00 | $214,356.00 |
| North Suburb | 41,500 | 34% | 49% | $47.00 | $178,902.00 |
| University Belt | 19,200 | 58% | 72% | $31.50 | $156,438.00 |
| Industrial Edge | 24,700 | 26% | 37% | $63.00 | $121,884.00 |
Formula used
Qualified buyers = Local Population × Target Demographic Fit
Serviceable buyers = Qualified Buyers × Service Area Coverage
Reachable buyers = Serviceable Buyers × Reach Rate
Category-active buyers = Reachable Buyers × Category Purchase Rate
Annual spend per buyer = Average Annual Transactions × Average Order Value
TAM = Qualified Buyers × Annual Spend per Buyer
SAM = Serviceable Buyers × Annual Spend per Buyer
Raw SOM customers = Category-active Buyers × Share Goal × (1 − Competition Pressure)
SOM customers = Lesser of Raw SOM Customers and Capacity Limit
SOM revenue = SOM Customers × Annual Spend per Buyer × Seasonality Index
Projected next-year revenue = SOM Revenue × (1 + Growth Rate)
How to use this calculator
- Enter the realistic population inside your local service boundary.
- Estimate how much of that population matches your ideal customer profile.
- Add coverage, reach, and purchase assumptions using recent campaign or sales data.
- Enter transaction frequency and order value to model yearly revenue per customer.
- Set a practical share goal and competition pressure level.
- Use capacity limit to avoid overstating what your business can serve.
- Review TAM, SAM, SOM, monthly revenue, and next-year projection.
- Download the results as CSV or PDF for reporting or planning.
FAQs
1. What does local market size mean?
Local market size estimates the revenue or customers available within a defined geographic area. It combines population, fit, reach, demand, and spending assumptions to show how large the opportunity may be.
2. What is the difference between TAM, SAM, and SOM?
TAM is the full revenue opportunity among qualified buyers. SAM narrows that to buyers you can serve. SOM is the portion you can realistically win after reach, demand, competition, and capacity limits.
3. Why include competition pressure?
Competition pressure reduces your obtainable share. Even with strong demand, rival brands, substitutes, and price gaps lower conversion potential. This field makes projections more realistic and less optimistic.
4. How should I set the seasonality index?
Use 1.00 for steady demand. Use values above 1.00 when seasonal factors raise sales, such as holidays or tourism. Use values below 1.00 when off-peak periods reduce demand.
5. What data should inform the target fit percentage?
Use demographics, income brackets, business type, lifestyle traits, prior customer data, surveys, census sources, or trade area research. Stronger segmentation improves the credibility of the estimate.
6. Why does capacity matter in market sizing?
Capacity prevents inflated forecasts. A business may identify strong demand but still lack staff, inventory, seating, delivery slots, or service hours to capture the full opportunity immediately.
7. Can this calculator work for digital or service businesses?
Yes. Replace physical service limits with practical reach limits, fulfillment capacity, or support capacity. The same logic works for agencies, clinics, local ecommerce brands, and subscription services.
8. Is this calculator suitable for investment decisions?
It is useful for directional planning, pitch decks, and scenario testing. Pair it with primary research, customer interviews, competitor analysis, and financial modeling before making high-stakes decisions.