Total Addressable Market
Who is your market? Market sizing review
TAM/SAM/SOM
Source: The Startup Owner's Handbook
See an overview of TAM in on pages 57–61 in ebook titled: Disciplined Entrepreneurship (linked).
Streaming Video content for review:
Market Size - Alexander Street Press Video
Market Size Video - Academic Video Online
You can do a top-down analysis using secondary market research [See left Market versus Industry]
market research = research about (market + industry)
Top-down sizing
Sources: Industry analyst reports, market research reports, competitors’ press releases, library resources, discussions with investors
Metrics: units shipped or sold, dollars, page views, sales revenue, etc.
Bottom-up sizing
Sources: Consumer/customer counts and demographics, typical prices, aggregate spending habits
Metrics: Dollars spent, % or # of population, current prices
(Source: Adapted from University of Toronto Libraries)
User Profile (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 their 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).
Market Size
Total addressable market (TAM) = "Theoretical customer base"
Served 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).
TAM SAM SOM from Gust De Baker (videos and worksheets)
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 can reasonably Serve X % of the market you can capture X average annual revenue = SOM
You need the following information to calculate SOM
SOM = (Total Number of Potential Customers) X (Percentage of Customers You Can Serve) X (Percentage of Market You Can Capture) X
(Average Annual Revenue per Customer)
To calculate - Use primary and secondary data. Interview experts from the industry, read articles, interviews and analysis on your competition. Find secondary research that is country or region specific.