Thursday, December 01, 2016

How Big is Your Potential Market, Really?

From: Bplans

Whether you’re a startup or an up-and-running business, you should know what your total potential market opportunity is for your products or services.

Assisting many companies over the years, as well as judged several business plan competitions, and it's surprising how most business owners can’t confidently tell you their total market potential. They say things like, “My market is everyone who eats dessert,” or, “Everyone in my community who drives a car,” or, “Anyone in the world who uses social networks.”

You may think these are your markets, but you need to drill-down and get more realistic and specific about the true size of your market, or lenders and investors will question your credibility.

That leads us to TAM —Total Addressable Market. When looking at TAM, you need to know how to calculate it, what it’s used for, and why it’s important—but all three numbers can be helpful to reference while you’re writing your business plan.

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