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Where TAM/SAM/SOM gives you the macro view, this template helps you build a bottom-up market sizing model from unit economics.

Bottom-Up Market Sizing and ARR Milestone Model

Most founders size their market from the top down - find a big industry report, take 1% and call it a plan. This prompt does the opposite.

By grounding your market sizing in your actual unit economics - your contract value, churn rate, expansion revenue, and sales cycle - it builds a model that connects directly to how your business actually grows. Rather than just calculating a market size number, you achieve a clear answer to the question every founder and investor really wants answered: how many customers do I actually need, and is that realistic?

Key inputs: your product and pricing model, average contract value, churn rate, expansion revenue assumptions, sales cycle length, ICP, and your addressable segment size.

What you get out:

• The exact number of customers needed to hit $1M, $5M, and $10M ARR
• A churn-adjusted acquisition target that accounts for the customers you'll lose along the way
• An implied sales velocity - how many deals per month your team needs to close
• A sense-check against your actual market size, with a flag for where your numbers start to look aggressive
• A sensitivity analysis showing what happens when your key assumptions are off by 20%
• A prioritised list of the assumptions most likely to break the model - and concrete steps to validate them before you rely on the numbers

The difference between this and a spreadsheet someone built in an afternoon is the assumptions log and the validation action list. Those two outputs alone will save you from building a go-to-market strategy on numbers that have never been stress-tested.

Want AI to do it for you?
Run the Bottom Up Market SIzing Model Prompt at the bottom of this page to generate a first draft for you.

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Unit Economics Inputs

• Average contract value — ACV (annual): [$X]
• Average MRR per customer (if applicable): [$X]
• Average sales cycle length: [X weeks / months]
• Average contract length: [X months / ongoing]
• Estimated annual churn rate: [X%]
• Estimated expansion revenue rate: [X% annually — e.g. seat growth, upsell, usage-based]
• Customer acquisition cost estimate (CAC): [$X]

Bottom-Up Market Size Model

• Number of potential customers in target segment (SAM): [X — from Section 02]
• Realistic conversion rate from prospect to customer: [X%]
• Implied addressable revenue: [$X]
• Implied sales velocity (deals required per month): [X]
• Expansion revenue impact: [Reduces new logos required by X% at each milestone]

Sensitivity Analysis

Market Sizing Assumptions