How To Calculate Your Startup’s Total Addressable Market (TAM) The Right Way | Dose 002

Founders often get TAM totally wrong. It's easy to calculate using this simple formula.

Steve Barsh, Dreamit Ventures Managing Partner, shares common mistakes founders make when calculating their Total Addressable Market (TAM) and gives you a simple formula you should use to accurately calculate your startup’s TAM. Many founders present their startups’ TAM as the size of the problem they’re solving or the market size of a well-known company in their sector. While these statistics can inform potential investors about the scope of the problem you’re addressing or the scale of potential competitors, it doesn’t help them understand your TAM—the total amount of revenue you can earn if you sell to 100% of your market. At the end of this video, you should be able to determine your TAM by multiplying the total number of customers in your market by your product’s price.

0:00 - Intro
0:26 - Top TAM Mistakes
1:32 - Market Sizing Example
2:20 - Correct TAM Calculation
3:34 - Takeaways
3:44 - Outro

[noahfrisch]

Another great video Steve! I’m really loving the quick 4-5 minute video format, they’re simple and easy to understand. Gotta get this out to more people—some great info that is super interesting and important

[tanglebox]

Caya at Slidebean referenced you - love the no BS advice. Breath of fresh air.

[ulalive]

this is the toughest among the slides. However you helped me a lot. One day I will find you and say thanks to you and DreamIT

[williamdean]

Short and to the point! Love how this format keeps it concise and doesn't over involve other topics while addressing the actual topic.

[patrickzeinali]

How would I figure out the TAM for mobile gaming? Monthly Active users divided by monthly revenue? Yearly?

[danbroderick]

I've been carefully looking for a well done, informative and common sense video explaining TAM for a work project I have been assigned. Anter looking at 30 videos, this is the one I am selecting. Best in class.

[eshanghose]

Hey Steve! Could you please make a video on how to determine the number of potential customers for a pre-launch startup? Thanks!

[DreamItVentures]

Got a startup? Join Dreamit's Rising Founder Program for current and aspiring founders!

[hellosharky]

Great series! I analyze startups on my channel and used your ideas to show a few examples where companies totally failed at calculating their TAM and one where they did a good job. Thanks for that.

[universalcuriosity]

Fantastic concise explanation - as someone setting up a business and developing their ideas - this has been essential to me.

[ronque]

Hi, Steve. Thanks for making this. I was wondering if these rules on bottom
up for TAM also apply to a tech startup that hasn’t really launched yet, so no revenue. I’m
still in the early stages preparing my MVP at the moment. Thanks.

[yusufabdulsalam]

Hey Steve, thanks for this video. Question: what about SAM and SOM? How do we calculate them?

[liranshamriz]

Btw you don’t even exist yet! 😂😂 boom!
Thanks for your honest and informative videos! Love it

[nickrose]

Loving these short 5 minute films Steve. Sport industry related question for you - and others - on market/audience/pricing. A new start up is looking at the amount of people that go fishing globally, which is 100m. We have a brand new 'product' to sell them, priced at $2. We are targeting 2% of that audience. Projected gross income therefore = $4m. Is that the wrong way of doing it? Is this classed as Top Down? Have I got that right. If yes, then how do we do Bottom Up when our product is not solving a problem? Sorry to ask - totally new to this - but hope you can help!

[andresjavage]

Great Video!
So would these TAM calculations for a CoWork space/shop for Mechanics make sense to you?


ASE-certified technicians who work at independent repair shops (582, 250) X ($5000) a month stall rent = (TAM) $2.9b monthly or $35b yearly
SOM (1% TAM) = $350m

[piratesalami]

Hi, you talk about de-risking the price. How do you do that? Talk to potentials? Check the expenses of building the product?

[MsDBlue]

OMG, that sh*t was Bomb! I understood that better than any other video on YouTube. Thanks Steve, you ROCK!

[lsoto]

Great video, I have a question about my product and how it addresses a problem with hospitals. There are 6093 hospitals I plan to market, my product is a hazardous waste containment unit. Can I estimate when discussing my TAM how many units I feel would be implemented? That number I feel would significantly impact the size of the TAM. I ask you this because from the perspective of a VC's eyes would this be acceptable? thank you, Louis

[AlirezaHusseini]

Hi,
Great info.
How do I do a TAM for a new market like Additive Manufacturing?
The market in very new and my bottom up analyses won’t be a great number to attract investors, how do I do?
Thanks

[creditwarrior]

Great way to explain it Steve! Customer x Price = TAM ...Thanks for your insights!