Step 14: Calculate TAM for Follow-on Markets

Two Types of Follow-on Markets How to Calculate Broader TAM Workshop Outline Overview Two Types of Follow-on Markets How to Calculate Broader TAM Workshop November 14, 2018

Overview This step: Consider “follow-on” markets you will expand into after dominating beachhead Calculate broader TAM November 14, 2018

Only focused on beachhead market Now Overview So far: Only focused on beachhead market Now Take step back, validate existence of other similar markets Make sure you’re heading in right direction (towards $$$) November 14, 2018

Two Types of Follow-on Markets How to Calculate Broader TAM Workshop Outline Overview Two Types of Follow-on Markets How to Calculate Broader TAM Workshop November 14, 2018

Two Types of Follow-on Markets Same customer, different product (aka upselling) Same product, different customer (aka adjacent market) November 14, 2018

Two Types of Follow-on Markets Same customer, different product (aka upselling) Already have idea of customer’s needs and priorities Useful in determining next product Already have sales channels in place But may stretch capabilities Same product, different customer (aka adjacent market) November 14, 2018

Two Types of Follow-on Markets Same customer, different product (aka upselling) Same product, different customer (aka adjacent market) Similar to beachhead (i.e., adjacent) More common approach than upselling May require new features or further refinement May require different packaging, marketing, pricing Challenge is establishing new customers in new market November 14, 2018

Two Types of Follow-on Markets Can pursue either strategy (or mixture) Upselling Adjacent market Analogy: bowling pins Beachhead market is lead pin… November 14, 2018

Two Types of Follow-on Markets This step: Identify some follow-on markets Estimate TAM Already have markets from step 1 (segmentation) Don’t spend too much time on this.. Focus is still dominating the beachhead market November 14, 2018

Two Types of Follow-on Markets Why calculate broader TAM? To be aware of long-term potential Investors like to see this Provide alternatives if beachhead fails Again- don’t let broader TAM distract you Beachhead is still #1 priority (for now) Have to win beachhead first.. November 14, 2018

Two Types of Follow-on Markets How to Calculate Broader TAM Workshop Outline Overview Two Types of Follow-on Markets How to Calculate Broader TAM Workshop November 14, 2018

How to Calculate Broader TAM Identify five or six follow-on markets Calculate TAM (as in step 4) Estimate number of end users Estimate annual revenue per user Multiple => TAM for that market segment General rule: to attract investors, broad TAM should be $1B+ With 10 or less follow-on markets November 14, 2018

Two Types of Follow-on Markets How to Calculate Broader TAM Workshop Outline Overview Two Types of Follow-on Markets How to Calculate Broader TAM Workshop November 14, 2018

Make list of market segments Should have this from Step 1 Workshop Make list of market segments Should have this from Step 1 Only change one variable at a time Same customer, different product (upselling) Same product, different customer (adjacent) Not both!! November 14, 2018

Discuss and identify markets that are most viable Workshop Discuss and identify markets that are most viable Estimate number of end users Estimate annual revenue per end user Calculate TAM You don’t need to be as precise as TAM for beachhead Rank top three markets in each category Same customer Same product November 14, 2018

Workshop GOAL: identify top 2 follow-on markets WORKSHEET: TAM for Follow-on Markets November 14, 2018