Permanent link for What Is Your Market Potential? on March 17, 2023

Entrepreneurs often struggle to figure out their revenue potential. I frequently see entrepreneurs greatly overestimate their market.

If you're selling a new inventory management solution into grocery stores, your total addressable market (TAM) is not the $810 billion grocery store market; your TAM is what grocery stores spend on inventory management solutions.

Your serviceable addressable market (SAM) is also not "every grocery store," but only the spending on inventory management solutions by those grocery stores where you have a real shot at making a sale based on your business model.

Your actual revenue potential, however, is only a fraction of that market; your serviceable obtainable market (SOM) is fraction of sales you expect to actually achieve based. This will grow with time and as your resources grow, and it's best to estimate it bottom-up.

Techcrunch has some great advice and insight: Nice try, startup, but that's not your serviceable obtainable market (SOM)

Categories: entrepreneurship
Posted by Thomas Hopper on Permanent link for What Is Your Market Potential? on March 17, 2023.