The business’ largest revenue stream was a channel partner program that enabled email marketing software companies to sell my old company’s software to their own customers. And one day, at an all-hands meeting, our CEO showed us a slide that listed every single email marketing software company we partnered with and the amount of customers they all had. To help you do this, we’ve put together a guide that’ll teach you exactly what total addressable market is and the best way to calculate it. Total Addressable Market (TAM) Total addressable market or TAM refers to the total market demand for a product or service. It’s the most amount of revenue a business can possibly generate by selling their product or service in a specific market. Unless they're a monopoly, most companies can’t capture the total addressable market for their product or service. That’s why most companies also measure their serviceable available market to determine how many customers they can realistically reach with their marketing and sales channels. However, total addressable market is still useful because businesses can use TAM to objectively estimate a specific market’s potential for growth. After you calculate your total addressable market, it’s time to determine whether it’s worth entering the industry or not. According to MIT’s Global Startup Labs program, an industry with a market size ranging from $20 million to $100 million per year is worth entering.
In college, I interned at a MarTech company that sold email marketing optimization software. With their software, brands could finally gain visibility into their email program’s deliverability rate or inbox placement, which almost all email marketing software, like MailChimp and Constant Contact, can’t do.
The business’ largest revenue stream was a channel partner program that enabled email marketing software companies to sell my old company’s software to their own customers. And one day, at an all-hands meeting, our CEO showed us a slide that listed every single email marketing software company we partnered with and the amount of customers they all had.
He told us this was our total addressable market. Then, he showed us a slide of how much of the market we had captured — it was a single digit percentage. Even though we were a $100 million business, we were shocked at how little of the market we had captured. But it also helped us realize that we still had plenty of room to grow, which motivated us to win as much of the market as possible.
Whether you want to start a new company and gauge its industry’s profit potential or forecast a realistic revenue growth goal for your business, measuring your total addressable market is a crucial first step you must take. To help you do this, we’ve put together a guide that’ll teach you exactly what total addressable market is and the best way to calculate it.
Total Addressable Market (TAM)
Total addressable market or TAM refers to the total market…
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