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Lessons learned: Total Addressable Market (TAM)

Pardeep Kullar
Pardeep Kullar

This lessons learned series is part of our live SaaS resource list we're building while launching a new product.

First time founders talk about product, more experienced founders talk about distribution and TAM. It matters a lot when you're thinking about fast healthy growth.

What one lesson about  TAM was the most important and why?

It does not matter if the market already has many competitors. That can be a good sign. It means the market is big. The dumbest thing we could do is go into a small market with very little demand.

Why does a crowded market not necessarily matter?

First, it's not a zero sum game. The market overall is expanding so you grow together while losing deals to each other. Having a big competitor in an industry that has built the market's understanding of the product can be a huge bonus because our biggest competitor is not that company, it's a lack of knowledge on the product and people continuing to do things the old slow way.

Second, you can be the new entrant positioned to say that the rest of them are doing it wrong, or you can go after an upset niche they're ignoring but which is still pretty large.

What dumb assumptions did we make about TAM at the very start of our SaaS journey?

The early days are all just a big mix of guessing, excitement, building MVPs and more guessing and excitement.

We didn't calculate the total size of the market for Upscope because we didn't know which market it belonged to. We know that products expand and change and adapt for larger markets as you learn more but mostly we were focused and excited about the idea. Now, years later, we understand why serial entrepreneurs think about TAM, distribution and product all in one.

What would we advise someone to do if they were starting from scratch?

Research your market. It's amazing these days that there are youtube videos, podcasts and blog posts where people tell you everything about their market and the problems they fix.

You can even find revenue figures for those companies and hear about a breakdown of where that revenue comes from. Jason Lemkin on Twitter is always giving those breakdowns for companies.

When you know the market a little better then it's time to start thinking about how to position your product for that market. Product positioning is critical.

If we had a magic wand how would we use it to improve our TAM?

We'd have every customer support team member on the planet watch a 5 minute video about our product :) 99% of our TAM is not taken up by our competitors but is simply that 99% of the future customer base has not heard of our industry and how our product helps them.

We're not competing against other companies generally, we're competing against older slower ways of solving the problem.

How will we use our experience for our new product?

For our new product we understand that there may be many competitors in the market all copying each other and maybe they're also copying each other's assumptions. It's possible for a disruptive new technology to open up a new section of that market for us and for them.

We believe that companies providing digital adoption platforms have services which take a lot of work to implement and maintain. What if you took away most of the effort and stuck with a simpler product that didn't need to do 80% of what they do. We don't think you need a full visual design studio to create onboarding flows. We believe it should be possible to simply talk and type and this becomes the onboarding flow.

Resources

Eventually TAM is everything

Here's a good short thread on TAM. Some of the comments are illuminating. We would not have understood this thread at the start of our journey but now it makes a lot of sense.

Thread on TAM

Pardeep Kullar

Pardeep overlooks growth at Upscope cobrowsing and loves writing about SaaS companies, customer success and customer experience.