Building a Bottom Up Business Model for Your Startup
Do you understand the key levers that drive your business? (#30)
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:
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.
