Event Recap: How Big is Your Market? Size it To Drive Sales
Entrepreneurs just starting a new business need to understand the size of their specific market, and how to target the right people at the right time.
Greg Pugh, a “serial opportunist” at Rev1 Ventures, presented, “How Big is Your Market? Size it to Drive Sales” to a group of entrepreneurs at Innovate New Albany on April 8. The presentation was part of Innovate New Albany’s Tiger Talks luncheon series, which educates business owners on the topics of Technology, Innovation, Growth, Entrepreneurship and Responsibility. TIGER Talks are offered free of charge throughout each month in an effort to help entrepreneurs “earn their stripes” toward starting and running a successful business.
Greg said all entrepreneurs must have a firm understanding of their three market types: Their total available market (TAM), their serviceable available market (SAM) and their serviceable obtainable market (SOM).
The TAM is the total demand available for a product or service in a market.
The SAM is the segment of the TAM that a product or service is designed to reach.
The SOM is the segment of the SAM that you capture with your plan now; the segment you can target and work with today. It’s your small sampling to prove that your approach, and product or service, actually works.
TAM, SAM and SOM all play an important role in assessing a potential business opportunity and alignment with potential investors. But your focus should be on getting the most accurate numbers, rather than the biggest possible numbers. Effective selling in the SOM is the aggressive leveraging of advocates, and the relentless disqualification of TAM and SAM prospects as early supporters.
Greg said it’s okay if you are able to reach a small percentage of a large market, or a large percentage of a small market. It becomes problematic when you are reaching a small percentage of a small market.
He gave several examples of companies who launched their businesses, and what their TAM, SAM and SOM stories were.
Greg said brands should leverage their advocacy by identifying who has an interest in your success. Examples of local advocates are Rev1, Innovate New Albany, and local councils and chambers.
He advised the entrepreneurs to arm themselves with a sound byte, have a distinct call to action, and “get offensive.” Getting offensive means to tell an advocate how they can help your business. While that might seem pushy, he explained that pushy people are often forgiven when they are passionate about what they do.
Greg showed the group a technology adoption curve graphic, which demonstrated the progression from innovators to early adopters, to “the big scary chasm” where many businesses fail. Those that are able to continue on change their approach, and adopt the early majority, the late majority and the laggards.
By identifying your industry’s target market and taking a systematic approach to leveraging your advocates, you will lay the foundation for future business growth and success.
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