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Building a Bottom Up Business Model for Your Startup
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Building a Bottom Up Business Model for Your Startup

Do you understand the key levers that drive your business? (#30)

Ben Yoskovitz's avatar
Ben Yoskovitz
Jun 27, 2023
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Focused Chaos
Building a Bottom Up Business Model for Your Startup
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Midjourney prompt: a bottom-up business model

TAM. SAM. SOM.

They’re all important acronyms.

But they’re also nonsense (especially for early stage startups.)

  • TAM = Total Addressable Market

  • SAM = Serviceable Addressable Market

  • SOM = Serviceable Obtainable Market

I’ve talked about these in the past, which you can read below:

Do Big Markets Matter for Early Stage Startups?

Ben Yoskovitz
·
April 25, 2023
Do Big Markets Matter for Early Stage Startups?

Almost every startup pitch includes a slide on market size. The goal of this slide is typically (and unfortunately) to demonstrate how big the market is and how well positioned the startup is to attain a chunk of that market. Does the size of the market actually matter?

Read full story

Most startups come up with their market size via a top-down method.

You research the market and often land on the “highest level market” you possibly can. For example, you might claim you’re part of the MarTech market (which is ~$330-$500B) and use that or some variation of that as your TAM.

Oh boy.

It’s too high level and absurd, because MarTech is a massive, convoluted bundle of many things. You have to niche down from there. But even a sub-category of a giant market like MarTech is often too big. And yet, I still see every pitch deck with a SOM-SAM-TAM combination…and I skip right by.

It’s only when I see a bottom-up business model that I’m intrigued.

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