Size your market A critical step in planning a business is to size your total market as well as the market that you will target. This will not only help as you start to create financial forecasts for your business, it will also help you to identify key trends that you need to understand. The best way to size your market is to use the customer and industry databases that have been set up for conducting this kind of market research. While these services usually cost thousands of dollars, many will be available for free from your local library. Total Addressable Market
Total Addressable Market (TAM) is the is the entire annual market for your products and services. How many customers are there for my products and services? How much does the average customer spend per year? How has this total spend changed in the last five years? How is this total spend expected to change in the coming five years? What are the factors that influence this spending? Who are the biggest companies in this market and what can I learn from them? Served Available Market
The Served Available Market (SAM) is the part of the total market that you could theoretically reach with your products and services. Who is the ideal customer for my products and services? What is their demographic profile? (age, gender, race/ethnicity, education) How do they currently solve the problem addressed by my products and services? Target market
Your Target Market is the subset of customers that you will actively pursue in trying to sell your products and services. Who are the target customers that I can realistically reach? What advantages to I have in trying to reach this market? Am I being realistic about the size of this market? How many customers could I realistically serve in the next one to three years?