What Is Total Addressable Market And How Do You Calculate It?


Have You Had To Say Something About Tam (Total Available Market Or Total Addressable Market) As An Entrepreneur Or Businessman In A Meeting Or An Application? This Article Will Give You Explicit Guide On Everything You Need To Know About The Total Addressable Market And What To Do With It. Total Addressable Market Means The Overall Revenue Opportunity That Is Realizable For Your Business’s Sales And Profit. This Is One Point That Many Start-Ups Get Wrong Especially When Pitching Their Business To Investors.  Many Startups Are Blinded With The Desire To Make Ends Meet And Just Make Money That They Jump At Businesses Without Proper And Realistic Plans. Basically, The Total Addressable Market Is Used To Evaluate And Determine The Chances Of Success; In Growth And Revenue, Of A Startup Business Within A Specific Period Of Time. A Tam Is Used To As A Tool To Show Investors That A Startup Can Really Make Waves In The Market And Probably Become A Multi-Million-Dollar Business In A Few Years.  You May Not Know Why Exactly You Need A Tam, But You Do Need A Tam Because It Helps You Determine The Growth And Possibility Of Your Company Or Business’s Success Over Time.

How Do You Calculate Your Total Addressable Market?

The Best Kind Of Pitches Ever Presented Anywhere Most Assuredly Contains A Total Addressable Market Slide That Reveals The Intentions Of The Business Owners To Maximize The Opportunities And Their Understanding Of The Market To Expand The Reach And Sales Of Their Products And To Continue To Grow As A Business Over Time. There Are However Three (3) Major Ways To Calculate Your Tam As Listed And Explained Below.

Top Down Method

This Method Uses Already Existing Research Results About The Market Or Industry To Draw Conclusions About The Market. It Goes In The Format Of “According To Research Made By Boulder, This Agricultural Industry Is A $**Billion Market By 2025”. While This May Be An Easy Thing To Do, There May Be No Assurance Of The Data Provided Because It Does Not Contain First Hand Fact. Market Sizing Which Is Better Done By Oneself Will Now Depend Totally On Information Gotten From Other Researchers And Analysts. Analysis Needs To Be Done With Specific Regard To Your Business; Product Or Service For Accurate Data, But This Method Does Not Allow That.

Bottom Up Method ­

This Is Almost The Direct Opposite Of The Top Down Method. It Uses Data Exclusive To The Specific Product Or Service To Be Evaluated. Here, You Calculate And Determine The Actual Price And Possible Consumers/Employee. A Bottom Method Make The Tam More Believable And Will Make Room For A Realizable Road Map.

Value Theory

This Method Shows How Much Value Can Be Added And Also The Road Map To This Reality. It Uses How Much Value The Product Adds To The Users Of The Product And Also Predicts The Amount Of Value That Can Be Realized Through Pricing To Determine Its Total Addressable Market.

The First Method Saves You From The Stress Of Research And Long Calculations, But The Other Two Will Not Just Explain In Details Your Addressable Market And How You Will Realize It, But Also Present You As A Serious And Hardworking Entrepreneur.