But when you own a niche, you command maximum pricing power and your marketing gets significantly easier. That’s the dream for every agency.

So, what’s the right size market for a $1M agency to own?

Your mileage may vary, but here’s a starting point for you.

You can run a $1M/year agency if you have 10–15 clients paying you $75k each annually.

If you’re well-positioned, you can win up to 50% of the projects you pitch. Over time, that win rate can compound into niche ownership. To do that, you have to pitch 20–30 clients every year. Your Serviceable Obtainable Market (SOM)—the clients you can realistically win—should be about 40–60 companies at around $3M–$4.5M total market spend. Your $1M target represents roughly 25–33% of that pool, which means you have room to grow without needing to reposition.

Your SOM comes from your Serviceable Addressable Market (SAM), the companies you can realistically target and serve. Your SAM should be about 400–600 companies, narrowed down by vertical, horizontal, or diagonal. At $75k per client, that’s $30M–$45M in total market spend. This is the pool you’re fishing from. If you can’t identify 400–600 real companies that match your ideal client profile, your niche is too narrow. If you can find more than 700, it’s probably a little too big for you to own.

Your SAM comes from your Total Addressable Market (TAM), everyone who could theoretically need what you do. Your TAM should be about 2,000–3,000 companies, representing $150M–$225M in total market spend.

(My friends at Seer Interactive have an excellent article on market sizing with TAM SAM SOM if you want to learn more.)

In summary, here’s the sweet spot for a $1M/year agency:

• TAM: 2,000-3,000 companies at $150M–$225M market spend

• SAM: 400–600 companies at $30M–$45M market spend

• SOM: 40–60 companies at $3M–$4.5M market spend

Let’s put this logic through its paces.

Are “schools” a good niche for a $1M agency?

• ❌ TAM: ~130,000 schools with ~$9.75B market spend (65× too large)

• ❌ SAM: ~13,000–39,000 schools at ~$975M–$2.9B (30×–65× too large)

• ❌ SOM: ~1,300–3,900 schools at ~$97M–$292M (30×–65× too large)

“Schools” are way too big a niche for a $1M/year agency. Spreading your agency’s reputation across a market of this size would require a marketing infrastructure and sales team typically beyond what a $1M/year agency has.

What if we narrowed from “schools” to “Montessori schools?”

• ✅ TAM: ~5,000 Montessori schools with ~$375M market spend

• ⚠️ SAM: ~500–1,500 Montessori schools with ~$37M–$112M market spend (on the high end, but still close enough to work)

• ✅ SOM: ~50–100 Montessori schools at ~$3.7M–$11.25M

Narrowing from “schools” down to “Montessori schools” puts you pretty close to the sweet spot. It’s a small enough niche that you could own it and a large enough one to make a lucrative, profitable business in. The Montessori community is tight. They share conferences, publications, and a fierce common identity. Do great work for a few of them and they can become your best ambassadors.

What if you narrowed even further to Association Montessori Internationale (AMI) accredited schools? There are only 221 schools recognized as official by AMI, so the numbers shake out like this:

• ❌ TAM: 221 schools with ~$16.5M market spend (10× too small)

• ❌ SAM: ~22–66 schools at ~$1.65M–$4.95M (10× too small)

• ❌ SOM: ~2-7 schools at ~$150K–$525K (9× too small)

Unless you had some unfair advantage that expanded your SOM or could increase the value of what you were delivering, the specific niche of AMI-accredited Montessori schools is probably too small to support the kind of business you want to run.

Wanna find out if your niche is the right size for you? Copy and paste these prompts into your AI tool of choice to get a benchmark:

I want to scale my {{ AGENCY TYPE }} agency to $1M/year. I work with {{ NICHE }}. Please estimate the TAM, SAM, and SOM for this niche in the United States, expressed in both number of companies and total annual market spend on agency services. Assume an average project value of $75k. Flag whether each tier is too large, too small, or in the sweet spot for a $1M/year agency based on these benchmarks: TAM of 2,000–3,000 companies; SAM of 400–600 companies; SOM of 40–60 companies.

If you learn that your niche is too big or too small, follow-up with this prompt:

Give me 10 suggestions for how to narrow or expand my niche to get closer to the sweet spot for TAM, SAM, and SOM. Show me the numbers.

Keep narrowing until the numbers land in range. When your SAM hits 200–400 companies, you’ve found a niche small enough to own and large enough to build on.