Hey Reader,
Market sizing is more than a pitch deck requirement. Once you’ve worked out it’s BIG, it becomes an internal guide for every feature, expansion play, and strategic decision. (𝕏 Tweet)
Sizing your market might feel a touch impractical, but it’s about the story it tells, the reality it cloaks and the future it hints at. This process unfolds in the framework of acronyms: TAM, SAM, SOM & TTAM complimented with a fab dose of SWAG (Scientific Wild Ass Guess). (𝕏)
Dismissing the criticality of market sizing reflects a tragic misunderstanding of its significance. It’s the start of the only thing that matters, securing customers one by one by one.
TLDR; This week’s market sizing workbook breaks down the formula into manageable steps with the right questions to guide you.
LAST WEEKS FRAMEWORK:
1.9 StartUp Founders: The 5 Pillars aka Empathetic Thinking
LETS GET INTO IT:
Market sizing, with its acronyms TAM, SAM, and SOM, feels like a moving target. Perspectives vary, opinions are wide, top-down or bottom-up, customer numbers or market value.
The top-down approach is often inevitable (total market spend) at the beginning, guiding your strategy until your model, pricing, and roadmap have enough clarity to go bottom-up and identify, prioritize and build for near term growth.
TAM (Total Addressable Market): The widest possible market for your product.
SAM (Serviceable Available Market): The portion of TAM accessible with your product as it stands.
SOM (Serviceable Obtainable Market): The part of SAM you can capture in the near term with existing resources.
TTAM (True Total Addressable Market): The realistic market size before you added a zero. The one you are truly truly building into.
This workbook might help you think about thinking:
The true gain of this process is in your ability to just better understand the market your are playing in, it’s a forced exercise in research and analysis….
It might feel audacious, to present an early stage pitch deck that outlines a journey to dominate a billion-dollar market. Who are you to think you can guide this StartUp towards $100m ARR? Funny you should ask. You’re the founder who believes it. At your core.
If you catch traction, your next move is to aggressively grow your TTAM each year, always searching for a bigger market to extend into. Look at Hubspot: $1.5bn ARR from just 10% of the market.
As always, you are welcome to grab time with me.
Good luck.
— James
