Top Down Revenue Model
Also called Top-Down Revenue Model · Top Down Forecasting
A Top Down Revenue Model forecasts revenue by using market metrics like TAM and SAM to estimate overall market size, then estimating current market share and then forecasting how that will change in the future to get to revenue.
Example
Ex. In a $100mm market, we have 10% penetration currently but think it can get to 30% in 5 years. So, if we’re at $10mm of revenue now you would forecast to $30mm in 5 years.
Why Top Down Revenue Model matters in investment banking interviews
Top-down builds are fast but easy to criticize, since "we'll capture 3% of a huge market" isn't a real plan. Knowing when to reach for bottoms-up instead is the judgment being tested.