Using bad data to determine your total addressable market is like building a boat with rotten wood. Sure, it might look like a boat, but it won't get you very far and will quickly fall apart as soon as you start poking at it.
Bad data is just as harmful: it inevitably leads to inaccurate models and poor business decisions—that is, if your company even trusts it at all. So what should you look for instead?
Good data should have two characteristics: it should be both primary and comprehensive.
Primary data is data that is either conducted by yourself in a market study or sourced directly from a government agency or international organization who does the same and provides the raw output you can modify to your needs.
Secondary data has been altered, filtered, or summarized by another organization.
Wherever possible, it's best to use primary data so that you can layer in your own assumptions and not be bound by the assumptions or filters others may have already applied.
Comprehensive data sources ensure that all businesses and industries are represented, and none are counted twice.
Secondary data is often filtered or partial. Even the best marketing databases won’t include every business, and will often double-count the same entity in multiple industries, and may include subsidiaries, acquired companies, or even divisions. For example, you may find a list or statistic for “SMBs” or “companies with more than 200 employees” or the “top 5,000 companies” but none of these will give a true indication of your market size. They are also impossible to combine, since many companies are included in multiple lists.
Your foundational data should follow the "MECE principle": business counting should be mutually exclusive and collectively exhaustive. In other words, count every business once and only once.
Using primary and comprehensive data will enable you to build a reliable model and compare apples to apples. Only then can you layer in and identify your assumptions to drill down into your real TAM, SAM, and SOM.
With a complete map, you can have a credible view of the market for pitching investors, guiding go-to-market strategy and new market entry, and developing data-backed sales territories.
For a real world example, try to use the comprehensive data sets from the US Census Bureau or Statistics Canada for North American primary data, then layer in filters and assumptions using your own primary data. This is much more comprehensive and reliable than relying on a list of businesses from a database like Crunchbase or ZoomInfo. These services are fantastic in their own right, just not when it comes to sizing your market—though they can sometimes play a role in drilling down to your target audience of ideal customers.
We've compiled a list of data sources that can help with market sizing, and of course, Scalepath's total addressable market software follows these principles and to build B2B TAM models in a fraction of the time as manual approaches.
