Step 14
TAM for Follow-on Markets
The calculation of the Broader TAM should be a quick validation that there is a bigger market and should reassure team members and investors that your business has great long-term potential.
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To start calculating the follow-on TAM, make a list of markets that are adjacent to your Beachhead Market. These markets should leverage your Core and fall into one of the following two categories:
- Selling your existing target customer new products, or
- Selling your base product (perhaps with modifications) to a new target customer.
You would not immediately branch out into a market where you are selling a different product to different customers compared to the beachhead. Instead, you change one variable at a time, either selling to new customers or selling new products to existing customers, so that you can rely on your strengths and knowledge from your Beachhead Market to expand. Each time you conquer a market, you can then move to an adjacent market.
Use your Market Segmentation from Step 1 as a reference if you are having trouble coming up with follow-on markets.
Once you have made this list, identify the markets that you think best leverage your Core and are in line with the passions and values of your team. Quickly estimate the number of end users and the annual revenue per user, then rank the top three markets in each category (same product and same customer) by indicating which market you would address first, second, and third.
You do not have the time to do the rigorous analysis you did in Step 4 for your beachhead, and you do not need that level of detail because, by the time you get to address these markets, your priorities and the market dynamics may have changed considerably. A top-down analysis with just a quick bottom-up “sanity check” is not only acceptable but appropriate at this point.
Next, for your top follow-on market from each category (same product and same customer), make a list of markets you could pursue if you won that first follow-on market. You will quickly estimate the TAM for these markets and rank them in order of priority.
Your goal is to identify the TAM for at least five follow-on markets, so you have a better sense of your startup’s potential beyond the Beachhead Market.
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The Disciplined Entrepreneurship Toolbox
Stay ahead by using the 24 steps together with your team, mentors, and investors.
The books
This methodology with 24 steps and 15 tactics was created at MIT to help you translate your technology or idea into innovative new products. The books were designed for first-time and repeat entrepreneurs so that they can build great ventures.
