The bottom-up approach to TAM/SAM/SOM starts from unit economics and builds up. Instead of narrowing from industry reports, you count individual customers and multiply by what they'd pay. This is typically more credible for startups because it's based on YOUR business model.
Bottom-Up TAM
TAM = Total Potential Customers × Average Annual Revenue Per Customer
Bottom-Up SAM
SAM = Addressable Customers × Your Price Point
Bottom-Up SOM
SOM = (Sales Team Capacity × Win Rate × Average Deal Size × 12) for Y1-Y5
MedTech Bottom-Up Example
Total potential customers: ~45,000 radiology departments globally Average annual revenue per customer: €13,200 (subscription) or €50,000 (device + maintenance) TAM: 45,000 × €25,000 blended = €1.125B SAM: 15,000 reachable × €25,000 = €375M SOM Y3: 8 sales reps × 15 deals/year × €40,000 = €4.8M
Key Takeaways
- Bottom-up starts from unit economics and builds up to market size.
- More credible than top-down because it's based on YOUR business model.
- SOM should be tied to sales capacity — how many reps × deals × deal size.
- Compare bottom-up with top-down — convergence = credibility.