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TAM Total Addressable Market

Posted by mjmedlock on April 3, 2019 in business startups |

It is important to determine the size of your beachhead market, as this will indicate if your selection is appropriate.

First you need to estimate the number of end users for your product.

Next, you should estimate the annual revenue each user will generate for your company.

Your beachhead TAM should not be too small, you won’t generate enough revenue, neither should it be too large, you won’t be able to dominate.

How to estimate the annual revenue per user

What does the customer currently spend on a product or solution to a problem?

What is the customer’s available budget?

Are there any proxy or comparable measures?

Additional points

How much profit will the revenue generate? This being said, your goal would normally be to generate enough cash to move onto the next market.

How long will it take to conquer the market? The shorter the better.

What is the market’s CAGR? Are you going into a growing sector, good, or a mature sector, not so good.

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