How to calculate Total Addressable Market (TAM) - Startups 101
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- Опубликовано: 21 сен 2024
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What is the Total Addressable Market, and How to Calculate it -
In this episode, we break down basic definitions such as TAM, what are the most common mistakes made while calculating and presenting this to investors, and how to estimate it properly. Steve will also demonstrate the simple formula that applies to every startup, no matter what the industry is.
#slidebean #startups #TAM
Check DreamIt's RUclips Channel: / dreamitventures
Follow Steve Barsh: / stevebarsh
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Our team of experts can also help you write and design your pitch deck and build the financial model for your startup.
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A platform for founders to scale their startup ► youtube.slidebean.com/TAM-comment
this was an MBA lecture done in 15 minutes. im in awe
Hahaha! It's True!
Haha, well not taking any MBA so I am fortunate.
Pure gold. Just redid my TAM slide. GUILTY as charged as a top-downer. Total convert now my entire life is about bottom up! THANK YOU yet again.
Carleen Haylett Thx for watching and so glad it was helpful! - Steve @ Dreamit Ventures.
Thank you! We're so happy to see it helped!
I have to admit that this is the best channel.
I concur!
I visit for 30 minutes every night.
Still no change on the market. We are already in the big crash, Inflation is a catastrophe. This CPI report is a colossal failure. To bring the housing market to a halt, the FED will have to pull all the stops. The unfortunate issue is that other markets are being decimated. If you want to stay green, you have to rely on a lot of diversification. Currently up 14% and being careful. Still a better deal than leaving it in a savings or checking account yielding 0-1 percent interest
If you are not in the financial market space right now, you are making a huge mistake. I understand that it could be due to ignorance, but if you want to make your money work for you, prevent inflation from eroding your savings, build generational wealth, and cultivate good habits and financial knowledge, you must be in the market
You are right! I diversified my $400K portfolio across various market with the aid of an investment coach, I have been able to generate a little bit above $1.2m in net profit across high dividend yield stocks, ETF and bonds during this red season
My advisor is "LARRY KENT NICK ". In terms of portfolio diversity, he's a genius. You can glance his name up on the Instagram and verify him yourself. He has years of financial market experience
INSTAGRAM
@ Larry Kent Nick Trading
I LOVE this GUY! Please collaborate with them again. I loved this video and saw so much value.
We love Steve, too! Looking forward to our next opportunity to collaborate!
How did it go? It has been 4 years now, were you able to build the company you were building, and raised capital?
This video is awesome, I'm a victim of top down approach and today the approach will change. Greetings from Kenya slidebean
Thank you! All our love back to Kenya!
Amazing, thank you! ... I think a lot of people don't understand how important this video is !
Not only this video is gold info, but has the right aproach in how to take on a market, and how your firm construct a key advantage over that spot. Guys and Gals of Slidebean for me you have surpassed the already high expectation that i had over your content.
Thank you so much, Camilo! Glad the video was helpful!
Thank you for posting. I've been a senior sales executive for years. Companies coming from overseas want to be successful in the US but they don't have the right approach. I will be sure to forward this to the many who ask me for help understanding strategy.
this video is a gold mine!
Thanks for watching! Very happy you found it helpful!
Thank you!
I realized through this video that marketing is by doing own research with mine not searching someones report pay to read. what a lecture what a genious talented man.
Well that would be impossible to do considering I'm in my late 50s and I'm more interested in investments that could set me up for retirement in my 60s, my goal is at least $2million.
As you plan your retirement, be sure to
talk with a financial advisor who can help you make the most of your retirement investing scheme.
@@MaryPatricia-wr3wj Very true, If you're looking for help
building a retirement nest egg, you most likely want a certified financial planner with expertise in retirement planning. With the aid of a coach, I grew my reserve from $160k to almost $600k during this Red season.
@@RichardWilliam-i4z How can one find a verifiable financial Planner, I buy the idea of employing the services of a Financial Advisor because finding that balance between saving and living requires counsel.
@@MaryPatricia-wr3wj KRISTIN GAIL CUNNINGHAM. On the internet, that’s the financial advisor I use. She’s verified; you could also read more about her and then communicate with her. it’s always good to do your research before putting your money into any investment.
@@RichardWilliam-i4z Thank you so much! Found her webpage and left a message. Hopefully, she responds.
I love these videos and they are super helpful. Can you make a more detailed video with multiple examples showing how to obtain good data to calculate bottom-up TAM. It isn't obvious or easy to understand how to figure out how many ideal customers are in the segmented market I will use in my estimate.
Great content. Please make a video on the assumptions one usually do while calculating TAM, SAM, market sizing. Also, where top down and bottom up approaches are effective.
Wow! This is a fantastic quick overview for any company of any size wanting to learn how to figure their TAM, total addressable market. Spoilers alter. Most of you are probably figuring it wrong. Thanks for the video!
True!
Cool. I kinda like your premiers. As I sit here in my startup office I got something asides from my next water break to look forward to.
What is your startup about?
And the DF?
Thank you for watching!
Glad you liked it! -- Steve
Great walkthrough of TAM! It seems like growth (CAGR) of the target market is also an important element to mention to investors.
Thanks for watching! Steve's insights are awesome!
I can listen to him for days
Thanks, Ahmet!
Salam, Great Video of info that the SBA and SBDC centers will NEVER tell you.
Can you do more videos like this?! where you bring in investors to help us topic like this? it's really helpful. I just realized I was way off on my TAM! LOL.
Thank you for watching! We're glad it helped! Browse our channel as there are many more videos related to this one! Also, you're welcome to discuss with other founders or Caya on Discord slidebean.com/startup-cafe
Top down model is taught by so many other channels. No wonder so many of us are trying to apply it to our business. I did think it doesn't make sense.... Now I know why! :)
Excelent content, cristal clear, please can you share also SAM and SOM calculation for a startup, thanks!
As a cyber security company, This video has solved my problem :) Thank you slide bean. I wanna connect with him.
this is the most practical helpful video I've seen in my life
I find these sort of videos fascinating. Not relevant to me at all, but I love 'em.
Interesting topic and definitely have fallen into the top down trap on early startups I tried. Nice to know that I finally got it right. My tam is $1.6B just in the US based on gov stats. Now who has a checkbook and a pen handy LOL
Thanks for watching Dave and glad to hear you got it right! - Steve
if you are a 4-Legged Cap Table startup, let me know. meaning: 1. you are a coder, 2. you got a co-founder. 3. you got an MVP (minimum viable product) 4. you got PMF (product market fit). Optional 5. Extra Leg: if you got $50k in friends and family round invested in you, i have the checkbook and a pen handy. LOL. Other than that, keep dreaming. P.S. Go convert your CPA's LLC stupid advise into Deleware corp, then i can open your e-mail; otherwise, it automatically all goes to junk folder and gets "deleted".
My God this video is SUCH GOLD
Thanks Jae! 😊
I'm glad found this content.
it helps with my learning journey for product/maket
Very very very helpful and informative.
Thank you SlideBean
Glad it was helpful!
Hi, brilliant video. Thanks for that. Is your definition of TAM what others explain with SAM or SOM? Because you are breaking down the TAM pretty much there would not be much left for SAM or SOM. Thanks for your answer.
Good Q! Welcome to discuss with other founders or Caya on Discord slidebean.com/startup-cafe
This is the key question here.
THIS
Thanks for making this video and saving my life
First time learning about TAM and I fully get it.
Can't be better, Piece of knowledge that worth
Thanks, Slidebean wish you the best
KEEP GOING
Very happy you found it worthwhile. Thx for tuning in! -- Steve
Our best wishes back to you! Thank you!
Steve is a great guy.
Thx for the props @Ikenna and for watching! - Steve
He is! :) Thank you for watching!
Literally the best explanation! it worked for me very well
You explained this so simply. Thank you as always
Yeah, you are right!
don't know where you come from but the presenter is 100% accurate, truth and the way "ALL startup should subscribe to". the rest are just "some ink over flow on toilette paper".
Thanks, F! David is a special guest from DreamIt Ventures, and we love him as well! Caya is the CEO of Slidebean, the company that hosts/created this RUclips Channel. Find out more at slidebean.com Welcome!
Thanks a lot for the video. Probably the best that I've seen so far. I have a few questions if I may.
Is showing an accurate TAM number sufficient? Or is it also important to show SAM and SOM?
And if the market is growing fast (30-35% CAGR), should the startup show the TAM for the current year or forecast the future TAM in 5-10 years (when the exit is assumed to happen)?
THANKS!
Glad you liked it. Thx for watching!
Thank you so much for prodiving multiple examples
Absolutely amazing and the best thing I've seen. So simple and clearly explained. Thank you so much!!
Thanks a lot this was super helpful. But my question is if I look for the wellness industry and then I only want women age x to x for example... how do I go about that? It's easy to find statistics on the total market or regional markets but then to know how many of those actually fit my other demographics?
I understand that Steve and Dreamit work this way, with a TAM and go-to-market strategy, but, since I'm pitching many different investors, and most of them probably work with TAM, SAM, and SOM, what should I do? I think the TAM on this video is the SOM on others. I don't know which approach to take.
The TAM in the video can be considered the SOM. At 00:55 he stated he is not a big fan of SAM and SOM. Based on the video what I gathered is he thinks stating the entire number of customers there are is useless. It is only valuable to state the customers you will be targeting not every possible customer that exists. Lets say for example your target market is college students. Your TAM (according to this video) would not be all college students if the college students that would interested in your product/service are medical students. Your TAM would be medical students not all college students. Hopes this helps someone better understand the video.
If i have a monthly subscription base, do I have to multiply that number by 12? Or is TAM not equivalent to 1 Year?
I am always on the hunt for good learning tools. This is a good one!
I imagine most people that come across this video are studying this subject, like myself, so I know I'm very much a noob and will respect any correction given, but this sounds like mashing TAM, SAM, and SOM together.
What's confusing me is that I understand that you wouldn't set the price of your product before knowing whom your product would serve (The SOM), so I'm trying to understand why you would use TAM as specific to a company and not a market. The video states that you've got to find "Your TAM", but I understand "Your TAM" or your company's TAM as SAM. TAM is the total market, yes? And SAM is the market as it is specific to a company, with SOM being the customers that can actually be reached.
Based on the example in the video, I understand that all companies would be the TAM, "All start-ups" would be the SAM, and "Target Customers" Would be the SOM". From there you'd figure out your pricing, correct?
Again, I'm happy to be corrected as I'm very new to this, but using TAM as company specific instead of market specific just seems unnecessarily confusing to me.
Timestamps
0:00 - Intro
0:31 - Steve Barch and TAM
1:10 - Mistakes startups do for TAM
1:35 - What is TAM NOT
3:36 - How to calculate TAM
5:35 - Examples
8:35 - Pricing
10:05 - Narrowing
10:55 - Slidebean example
12:25 - What investors is looking for
13:45 - Summary
All the best
Thank you!
Very simple and clear explanation!
Good video. I am a tech startup in Singapore. Hope to get connected with the speakers. Thanks.
Very helpful, thanks, Steve!
Man, started calculating my TAM bottom up, my partner is a top down guy
also, i sell multiple products so I used the average amount of money customers spent
I love Caya. He is simply faadoo
BEAUTIFUL VIDEO. well explained!!
Thank you for watching!
Interesting ! But what about the TAM when your business model is based on a variable commission ? For example in the betting/casino industry where the user deposit the amount of money he wants, there is no fixed price for your service so the TAM is not relevant ?
Thanks guys and continue the good work ;)
Just document your assumptions around spending (price) and possibly segment the audience and spend.
@@stevebarsh7727 Thanks Steve. Looking forward to see more content like this
@@damveiss7517 It's coming! Look for the #DreamitDose in the RUclips Dreamit Ventures channel.
@@stevebarsh7727 Thanks Steve
I like how Steve used Slidebean as an example
We love Steve!
@@slidebean Can you make a video on SAM,SOM
I just tossed my entire startup financial model into the trash! What a revelation!
Hope the video helped!
@@slidebean
I'll be spending this night redoing all my models - Thank you for this channel and the superb content you put out!
Super useful, keep on the great work!
Glad it was helpful!
Now I'm even more confused. If the TAM no of customer is already broken down to your target niche and geography, what's left for the SAM and SOM breakdowns of the market?
Great explanation. Please the SAM and SOM plss
Can I include TAM, SAM, and SOM as the user base, such as '5 billion users in a particular market,' or should I only use monetary value, like the size of the market in terms of dollars?
Now how do we find the information to calculate that TAM correctly? - # of niche-specific companies, - Corporate behaviors across different regions to calculate the global scale of the problem. - etc, etc, etc.
Thank you! That was super helpful
This video is extremely informative
Hi Steve, Great informational video once again! Question: why are you not a fan of SAM & SOM? Thanks
SAM and SOM are fine. I often find TAM + your go-to-market strategy get's the job done very clearly.
To all the VCs out there - If you ever find a pitch deck with inaccurate TAM, please send them the link of this video instead of laughing at it. Would be beneficial to both of you.
THIS WAS GREAT!
That was rich! Thanks Caya and dreamit
@denzel - thanks for watching! you're welcome! -- Steve
Thanks, Denzel!
Question: What pricing would you use if you have a three tier subscription plan to calculate the TAM? Would I be wrong to use MRR or ARR? Or will it be the sum total of TAMs for each plan?
Great channel by the way.
Might want to calculate the TAM using adoption/ tier.
Ex: Price: T1Px0.25+T2Px0.6+T3Px0.15
T1P = Tier 1 Price
0.25= projected share of the customers that will choose that tier.
This is how I'd do it,hope it helps. Have a good day.
@@Robertohanas Hey dude, this was really helpful. Do have anything on how to calculate the projected share of customers?
What if you have multiple types of customers? Should you have two separate TAMs or one on your deck?
Brilliant video.
Glad you enjoyed it!
This is worthy sharing
Great video, totally agree! Can you do a explanation on SAM and SOM ?
so amazing, got to know a lot of things in detail
Thank you
Many startups have no idea how to investigate or keep tracks of their market, or even the current market state. Other create startup, work for 1 or 2 years max, pocketing half the money from investors and sales and close the company as it is in the red and walk away with few millions(I know number of people who do this every 3 years)
Thank you for your comment! Interesting!
thank you for this!
This is a very helpful video, but my question is "If you are developing a social media app like facebook, who make up the TAM customers? the advertisers OR the users?"
This is awesome. But I have a question. In the bottom up process, how do you calculate the TAM for something as universal as WhatsApp? Imagine WhatsApp when they had launched and lets imagine that it charged $1 per user per month for the sake of this exercise. How would you calculate the number of customers at that stage? Any thoughts guys?
Great video very informative thank you!
Glad you enjoyed it!
Valuable information but I think he should get to the point on how to calculate your TAM without mentioning the mistakes startups make because that makes it more confusing in my opinion. Also, it would be great if you made a video explaining if there is in calculating your TAM when you are providing a service, product, mult-isided platform.
Great video! But how do you even start to calculate how many branches of mid-sized banks (or whatever selection you finally found possible) there can possibly be?
Good remarks! Welcome to discuss with other founders or Caya on Discord slidebean.com/startup-cafe
It was intuitive
I have some questions
1 how to think the Tam evenif the cost of company’s products is not the same it’s a services product so how
2 could I approximate the price to be a medium price?
I may be wrong, but it feels like you are wanting to see the SOM and not the TAM or SAM? That makes perfect sense to want the SOM number, but the "showing your workings" is illustrated by the TAM and SAM?
Thank you!
Good info! But where do you get the information to get this drilled down in information?
This is what I pitched with one HNI. He said my projections are low. I said this is what we'd achieve in early days and he said Fuck Off. Nice presentation to make sure startups doesn't have self fulfilling prophecy.
Thanks for watching!
This was gold.
That's great content. Thanks 🙌🏿
wow, thank you, this is gold !!
awesome video and a golden advice
Happy you found it worthy! Thx for watching. -- Steve
Thank you, Faisal!
From this video, is it implied that it would not be possible to calculate the Tam of an idea ?
this video is like gold inside a gold mine. Amazing!
Thanks!
How would you calculate TAM for a gambling startup where the amount the player spends would vary greatly? I can't even attempt at a ballpark figure because i just don't know.
Thank you ❤
well explained in a simple language
This was of great value!!
Amazing video 👍🏾
Glad you liked it. Thx for watching!
Thank you for watching!
Would love to see how to calculate TAM for an ad revenue based model, such as LinkedIn
Same approach. Document your assumptions around how many customers (CAREFULLY document those assumptions and pressure test them as best as possible) and figure out your pricing. Your biggest assumption is going to be around how big an audience you can build and over what period of time. Thx for watching!
Hello Steve, great presentation. Learnt a lot. My question is, how do you propose that a company going into art and culture exhibitions for 3rd party museums set their price? This will help sort out what exactly should the TAM be.
Impressive content.!
Glad you liked it @oxglow. Thanks for watching! -- Steve @ Dreamit
Thanks for watching!