2. WHAT ARE TAM SAM SOM?
Different ways to estimate how much a startup
might be be able to make someday
TAM: Total Available Market
SAM: Serviceable Available Market
SOM: Share of Market TAM
SAM
SOM
3. HOW BIG DO YOU NEED TO BE?
VCs like businesses that can scale up to
$100M in annual revenue within 5 years
Therefore, target a total addressable
market of $1B or more
Consider this to be a Sanity Check
4.
5. TAM: TOTAL ADDRESSABLE MARKET
How much money could you make if:
Units:
Every possible customer in the world used
your product?
Dollars:
How much money is being spent to solve this
problem every year?
6. TOTAL ADDRESSABLE MARKET
Example: Dollar Shave Club
Product: Cheap mail-order razors
for men
Video: https://www.youtube.com/watch?v=ZUG9qYTJMsI
7.
8. TOTAL AVAILABLE MARKET I
What’s the US Shaving Market?
General Population: 320M
Men: 50%
Non-bearded: 80% ish
Shaving Age (16-80) 80% ish
General estimate: 100M
9. TOTAL AVAILABLE MARKET II
What’s the disposable razor blade market?
Eligible Population 100M
Use disposable blades (vs. electric) 75%*
Blades / week 1.0*
Weeks/ year 52 weeks/year
Unit Sales: 4B / year
Average cost: $1.00*
Total Available Market: $4B / year
* Needs to be tested
10. TOTAL AVAILABLE MARKET II
What’s the disposable razor blade market?
Total population 100M
Use disposable blades (vs. electric) 75%*
Blades / week 1.0*
Weeks/ year 52 weeks/year
Unit Sales: 4B / year
Average cost: $1.00*
Total Available Market: $4B / year
* Needs to be tested
TAM Expressed in
Units
Dollars
11. IS THIS GOOD?
Generically investors like to
see $1B markets
”Aim at a small target
and you may miss”
“Aim at a large target
and you increase
the likelihood of a hit”
12. SAM: SERVICEABLE AVAILABLE MARKET
How much of that market can we serve with our specific product?
SAM is the “internet saavy shaving population” that may buy online
TAM: $4B
Age group of 18-35 40%
Online purchasers now 5%
Online purchasers 5 years from now 75%
Estimated Now: $80M
Estimated SAM in 5 years: $1.2B
* Needs to be tested
13. LAST COMES SOM: SHARE OF MARKET
How much money will you
REALISTICALLY be able to make?
SOM is a through
Bottom-up analysis
Value per customer x
number of customers reached
15. MIKE’S BELIEF IN SHARE OF MARKET
We’ll sell through our viral videos (strategy)
50% men (average)
75% use disposable razors (average)
10% turn into customers after seeing ads (experiments)
3.75% conversion (0.5 x 0.75 x 0.10)
16. MIKE’S PLANS
Target 5M views
5M views x 3.75% conversion = 187,500 customers
187,500 customers x $60/year = $11.2M revenue
$11.2M revenue / SAM of $80M = 14% SOM
17. REMEMBER… THESE ARE JUST ESTIMATES
TAM: $4B
SAM: $80M
SOM: $11.2M
You don’t have to perfect
You’re trying to convince yourself
and prove to investors that you
have a viable business
OR TAM
SAM
SOM
18. MIKE DID OK…!
They blew away their numbers
Expected Actual
Views 5M 22M
Conversion 3.75% 13.6% *
Customers 187K 3M
Revenue/Customer $60 $66
Revenue $11.2M $200M
* Includes
Word of Mouth (WoM), referrals, etc.
19. WHY THE DIFFERENCE?
Created Brand Loyalty, Upsells, Referrals
Bought by Unilever (Gillette) July 2016 for $1B
Expected Actual
Views 5M 22M
Conversion 3.75% 13.6% *
Customers 187K 3M
Revenue/Customer $60 $66
Revenue $11.2M $200M
20. TAM CAN GROW OVER TIME: FACEBOOK
Harvard Students
22K
All US Colleges
20M
Worldwide Internet Users
3.2B