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Step 4 Calculate the Total Addressable Market (How to calculate (Confirm…
Step 4
Calculate the Total Addressable Market
Sanity check that you are headed in right direction
TAM - total revenue / year you'd get if you got 100% penetration
How to calculate
Check how many end users (using bottom up analysis)
Customer lists, trade associations, and other sources of customer info
Then see how many customer and end users - like checking the net but a bit more
Confirm with top down analysis
Secondary market research reference
Like an inverted pyramid with max on top level, then reduce till you get to just end users on last level
appendix 1, table 3 sample
Determine how much revenue each consumer worth per year
Consider how much value giving them
their budgets
How much they spend to fulfill this need
Multiply the 2
Choose big enough that
can develop key capabilities
but not too big that can't compete cause can't raise enough resources
20 - 100 million good
But can make work with even 5 mil if good margins / can capture market quickly
Consider growth rate of TAM as well
Hints can be taken by standards like "designers per million dollar revenue or 1000 employees" etc
Sample TAM calculation Appendix 1, Table 2