Bottoms-Up Market Sizing

Directory Bottoms-Up Market Sizing Approach

Directory Bottoms-Up Market Sizing Approach

Note: This post is part of a series on 8 B2B Market Sizing Approaches to Quickly Assess Market Opportunity.

Bottoms-Up Market SizingThis is a bottoms-up market sizing approach (see the homepage for an explanation of top-down vs. bottoms-up market sizing) where you identify online directories that list companies potentially within your target market, and you construct a list of all of these types of targets. The main problem with this approach is that the information is limited and rarely matches your specific market definition. Consequently, the list of companies usually needs to be validated via a second source, making the approach much more time consuming. It’s best to combine this approach with the LinkedIn bottoms-up approach to get better coverage.

When is it Useful?

This approach provides a list of targets when completed not just a count. This makes it a great approach for:

  • Evaluating segment opportunities to target in a go to market strategy by eliminating the need to build a list of targets after you select a segment.
  • Assessing market opportunities that are mainly dependent a specific industry or sub-industry. You can get way more precise with this approach in that regard than on LinkedIn.
  • Getting a quick estimate for regulated spaces. The government lists are generally pretty accurate, especially if it is a federal entity. However, they tend to be less so if it is a state, municipal, or city-level entity.
  • Sizing blue collar or SMB spaces that may not be as accurately listed on LinkedIn.
  • When company size is not a significant attribute.

Market Definition Restrictions of the Approach

You are limited to what is tracked by the directories and associations listed online to some degree. This will vary by industry and space. However, you can also turn to outside sources for qualifier attributes for a specific industry, sub-industry or space.

It really pays off to have some knowledge of the space when looking for the directories, associations or lists.


If you can find a really good directory, this can be a very accurate way of identifying all of the companies in a given space. Sometimes, the directory will even provide you with a sense of coverage if it is an industry organization or association. However, it generally will not allow you to qualify all the companies. Therefore, you will have to use an alternative source to qualify each of the companies, which can be time consuming.

The end result is a canonical list of the companies in the space, not a number. This allows you to vet the list, where as top down approaches do not allow you to do this check.

Most importantly, if you decide to go after this space, you will already have the list of targets in hand and won’t have to go figure that out.


Most directories are not frequently updated, so they tend to have many inaccuracies. For example, many directories list companies that have gone out of business or been acquired for many years after the event occurred. However, there are some directories that are maintained by associations, industry organizations or the government that are very accurate as they have regular interactions with the member companies or even have regular dues paid by the organization. These regular interaction serve as validation that the company is still in operation.

It is rare that a directory will be a perfect match for what you are looking for so you are typically forced to identify multiple directory sources to build the market. This leads to double counting issues that can be difficult and time consuming to deal with due to the different naming conventions that a company may use. For example, some banks may list themselves by their formal name such as Bank of America Corporation on the FDIC directory, but on another directory it may be listed as Bank of America.

This approach typically requires some sort of secondary validation unless the resource is a government operated directory or licensing organization because the coverage of the directory will not be known.

This approach can be really time consuming because you have to find all the potential directories and then vet each one before determining it is a good source.

A Step-by-Step Guide to Set Up and Execute a Directory Bottoms-Up Market Sizing

Step 1: Determine your market definition.

Figure out the necessary attributes to qualify the opportunity.

Step 2: Search for a government list or directory for a specific industry/space. 

These types of directories will exist for almost all state or federally regulated or funded industries. The key to finding them is understanding how the government is involved in the space. The government is typically involved to protect citizen welfare albeit for safety, finances, health, access to resources, social opportunities, etc.

For example, banks have to maintain a certain level of assets with the Federal Reserve and they publish a list of financial institutions and their assets under management. Similarly, the government maintains a list of organizations with FDIC status, since this is something they do to protect US citizen savings.

Record each one on a spreadsheet with notes about the list and how it can be used to address your question. Sometimes this will be a sufficient list on its own but usually the market definition won’t be exact and it will be worthwhile to see what other types of lists or directories are out there.

Step 3: Go to Google and search for “company type” or “group of companies” and “association”.

This will pull up most related organizations. Record each one on the spreadsheet with notes about the organization and whether or not it offers a list of member organizations.

Step 4: Do a broader Google search for associations. 

You will want to search for associations/organizations using the following tactics:

  • Broader group associations: For example, if you are looking for EHR vendors, you may want to look for healthcare software association and variations of this.
  • Sub-industry associations.
  • License organizations: For this you will need to do a little research around licensing and regulatory requirements in the space to know what to look for. This will typically be uncovered in the governmental organization search if the licensing organization is part of a local, regional or national government. However, licensing is privatized in some cases so it is worth looking. For example, Scrum certification is managed by a non-governmental organization called the SCRUM alliance.

Make sure to record each one on the spreadsheet with notes.

Step 5: If you still have not found a group of solid lists, then you will want to search for other directories and lists online. 

The best way to do this at least to start is to search Google for “industry/space” and “directory” or “list”. Sometimes the best way to find these is to look for top 100 lists and then find the source that they pulled this information from.

The key here is trying to find the root sources and only chasing worthwhile leads. Be sure to add these sources to the spreadsheet with notes.

Step 6: Now you have a fairly comprehensive list of potential directories or lists.

You will want to walk through each one and figure out its limitations, coverage, additional qualifying attributes available, and whether or not it looks like a reliable source. You probably want to note the difficulty of extracting the data from each of the sources as well.

Step 7: Now you should review these notes and figure out the best way to re-construct the list of companies in this space/industry using these resources.

You will want to remember that the more lists you try to cobble together, then the increased risk of duplicates that will be very difficult to remove. Also, lists that have all of the market characteristics necessary to apply your definition will make completing this exercise much faster, so they should be considered even if they are a little less reliable.

Step 8: Categorize your resources.

Once you have identified the best set of resources to identify the list of companies, you will want to record them in a spreadsheet and categorize them into sub-markets/sub-industries wherever possible if the combination of sources allow you to do so.

This will help you with the de-duplication process.

Step 9: De-duplicate the list of companies.

For this you will want to try and systematically remove issues like removing “LLC,” “corporation,” “locations,” etc. This will save you a lot of time and resolve the biggest issues.

Before you do this, you will need to establish what is the purchasing unit of your goods and services, as this will affect how you count number of opportunities.

Step 10: Identify what other qualifying attributes you need to collect and identify the best sources for this information. 

Step 11: Collect these qualifying attributes and filter the list to only the relevant companies within the target market.

Step 12: If number of locations is relevant to the opportunity sizing, then you will have to figure out a way to come up with this number.

Depending on your sensitivity to accuracy and the availability of data, this may be something you want to approximate by research a sample of companies in the space and applying the average to the total number of companies.

Step 13: Review each sub-list of companies to make sure that they all look like relevant targets. 

This is easier for companies that are evaluating larger enterprises because you can usually just eyeball the list of companies. When using this approach for non-fortune 500 segments, you will want to manually look-up at least 5% of the companies to make sure the list accurately reflects your target market.

Step 14: Estimate average sales price (ASP). 

You can do this overall, on a sub-market level, or a subset of a sub-market. The level of detail that makes sense will depend on your specific market.

Don’t try to get over-precise — that will often lead to outliers that really skew ASPs. Make sure you have a solid number of customers in each sub-market to ensure this does not cause a problem. Be sure to annualize these prices so you have a one year value. That will be easier to convert into multiple year opportunity estimates or evaluate your addressable market.

Step 15: Create a new column in the spreadsheet for estimated ASP and populate it with your estimates for each sub-market.

Step 16: Lastly, multiply the number of companies in each sub-market times the ASP. If your unit of purchaser is locations, multiply number of companies times locations times ASP.

This will give you an estimated market opportunity value in dollars for each sub-market which you can add together to get your final market size.

Example of the Directory Bottoms-Up Market Sizing Approach in Action

Question: What is market size for firm who sells to US firms in Financial Service industry with at least 1,000,000 customers and an ASP of $100,000?

What does this target market entail?

  • Can it be broken-down into sub-markets?
  • FDIC Insured versus Non-FDIC Insured
  • Type: Commercial Bank, Retail Bank, Asset Management Company, etc.

What is definition of Opportunity?

  • Firm, location, division?

How many US-based financial service firms are there with at least 1 million customers?

  • Government Directories: Regulatory Agency and Regulation directories and databases
  • Private Directories: Top firm lists, Association membership lists, licensing organizations

Does any combination of directories allow for us to directly or indirectly estimate customers and cover the whole space we are interested in sizing?

How do we get from these lists to qualified customers?
  • Convert Assets Under Management to Customers for each list of companies.

Assets Under Management Conversion

  • Create list of qualified companies in each sub-market.
  • Now dedup lists and count remaining companies.  We get 119 target opportunities.

What is the overall market opportunity for this firm?

  • Target Market Opportunity = Number of Opportunities * ASP = (119) * 100,000 = $11,190,000

Additional B2B Market Sizing Approaches

Click here for the following how-to guides and stay tuned as more become available:

Marketing Manager, Pricing Strategy
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