/ Finance

The SaaS Ceiling

Most ideas are too small. Check the math before you build.

Why it matters

Don't build a product for a market that can't support your goals. Validate the market size first.

A TAM/SAM/SOM calculator sizes your market ceiling and the share you would need to hit a revenue goal: niche size times monthly price times 12 is the max ARR, and goal divided by annual price divided by niche is the market share required. Take a 100,000-person niche at €30/month: the ceiling is €36,000,000 a year, and a €1,000,000 goal needs about 2,778 customers, roughly 2.78% of the market. The 10% line is a rough SAM and the 1% line a rough SOM.

How it's calculated

Four steps, all from three inputs:

  • Market ceiling (TAM, max ARR) = niche size x monthly price x 12
  • 10% of market (rough SAM) = ceiling x 0.1, and 1% (rough SOM) = ceiling x 0.01
  • Customers needed = revenue goal / (monthly price x 12)
  • Market share required = customers needed / niche size

Worked examples

Niche Price/mo Goal Ceiling Customers Share
100,000 €30 €1,000,000 €36,000,000 2,778 2.78%
20,000 €99 €2,000,000 €23,760,000 1,684 8.42%
5,000 €500 €3,000,000 €30,000,000 500 10.00%
Market Ceiling (Max ARR) -
1% of Market -
10% of Market -
Customers Needed -
Market Share Required -
Market Share (%)
1%
10%
GOAL
VERDICT

Enter your niche size, price, and revenue goal above to see whether your target is plausible.

Questions people ask

What is the difference between TAM, SAM, and SOM?

TAM is the total addressable market, the full revenue if everyone who could use your product bought it. SAM is the serviceable addressable market, the slice you can actually reach with your model and geography. SOM is the serviceable obtainable market, the share you can realistically win in a few years. This tool treats your niche size as the TAM ceiling and shows what 10% (a rough SAM) and 1% (a rough SOM) are worth in annual revenue.

How do I calculate the market share I need to hit a revenue goal?

First find customers needed: divide your annual revenue goal by the annual price per customer (monthly price times 12). Then divide customers needed by your niche size to get the required market share. For a €1,000,000 goal at €30/month across a 100,000-person niche, you need about 2,778 customers, which is roughly 2.78% of the market.

What counts as a realistic market share for a new startup?

Under 1% of the niche is plausible and usually enough for a lifestyle business. Between 1% and 10% is hard mode: reachable, but it takes real capital and years of execution. Above 10% is rare for a new entrant, so if your goal requires it, either niche down to a smaller market or raise your price so each customer is worth more.