WHAT IS STEP 4, ESTIMATE THE TOTAL ADDRESSABLE MARKET (TAM) FOR THE BEACHHEAD MARKET?
Estimating the TAM is a process to estimate the total revenue you could achieve (in units of dollars per year) in your Beachhead Market if you achieved 100 percent market share.
WHY DO WE DO THIS STEP, AND WHY DO WE DO IT NOW?
The TAM needs to be an appropriate size for your new venture. Too big and you won’t be able to mobilize enough resources to compete; too small and your company won’t have enough revenue to sustain itself. The exercise of calculating the TAM also increases your team’s knowledge of the market. Beyond just a simple number, your team will exit this step understanding what makes the selected Beachhead Market attractive. This understanding may be more important than your TAM size and a simple “go/no go” decision.
To calculate the TAM, you will do the following:
- Estimate the number of end users in the Beachhead Market, using a combination of top-down and bottom-up analysis.
- Estimate the annual revenue that each end user is worth to your company.
The TAM will be ...