Market Size
Total addressable market (TAM) = "Theoretical customer base"
S
erved Available Market (SAM) = potential customers, who may purchase the product from a supplier
Target Market = the number of customers the company believes it can sell to
Sales Budget = what the company anticipates is will sell in a given period
Try the worksheet linked in ebook titled: Discipled Entrepreneurship Workbook (linked)
See an overview of TAM in on pages 57–61 in ebook titled: Disciplined Entrepreneurship (linked).
Bottom up approach
The user profile is used to identify secondary research sources for your calculations.
Remember - seldom does ONE source provide all of the needed information.
- How many users are there?
- Look at demographic information, is there a proxy (stand-in or similar product) that can be used to determine users), where can you collect intelligence (information) are your potential users? Examples of places to talk with potential customers are a: tradeshow, conference, meet-up, seminar, or hang-out in between a meeting or after work (bar, restaurant, etc.).
Try the worksheet linked in ebook titled: Discipled Entrepreneurship Workbook (linked)
See an overview of TAM in on pages 57–61 in ebook titled: Disciplined Entrepreneurship (linked).
Top Down Approach
The top-down approach
You can do a top-down analysis using secondary market research
TAM
Total Addressable Market OR TAM
"Total Number of Potential Customers X Average Annual Revenue per Customer = Total Addressable Market (TAM)
You need the following information to calculate
- An estimate of how many people or businesses could potentially use or buy your product or service. (Total number of potential customers)
- An estimate of how much each "customer" (person or business) would spend annually on your product or service.
SAM
Serviceable Addressable Market (SAM)
This is the revenue opportunity from the portion of TAM (above) you can realistically serve.
Total number of potential customers X Percentage of Customers you can serve X Average annual revenue per customer = SAM (Serviceable Addressable Market)
You need the following information to calculate SAM
- Calculated TAM (above): Your TAM or a subset that could potentially engage with your product or service.
- Determined a % of customers that you can realistically sell your product or service to.
- The amount of revenue your expect each customer to generate annually.
SOM
Serviceable Obtainable Market (SOM)
Calculate this by
Total Number of your potential customers X % of Customers you van reasonably Serve X % of the market you can capture X average annual revenue = SOM
You need the following information to calculate SOM