When evaluating a startup opportunity, it is important to assess the potential size of the market. This involves conducting a market and opportunity analysis to determine whether the venture could generate substantial revenue, potentially reaching millions or even billions. The process begins with developing a business model canvas that outlines hypotheses about the product or service, target customers, and revenue model. However, it is essential to go beyond initial assumptions and analyze the market size, competition, and growth potential to ensure the opportunity is worth pursuing over the next few years. A key concept in market analysis is the [[Total Addressable Market (TAM)]], which represents the entire market demand for a product or service. TAM can be visualized as encompassing all potential customers and the total market value if everyone purchases the product. To estimate TAM, entrepreneurs can use industry reports from analysts like Gartner, Forrester, or Nielsen, depending on the sector. Understanding TAM involves breaking down the market into specific segments and identifying key players and competitors. This understanding is crucial before moving on to determining the Served Available Market (SAM). The [[Serviceable Available Market (SAM)]] narrows down TAM to focus on the segment of the market that a company can realistically target and serve. For instance, if developing an Android app, SAM would consider active Android users with compatible devices. This involves considering factors like pricing, distribution channels, and customer accessibility. Entrepreneurs must engage with customers, channel partners, and competitors to refine their understanding of SAM. This step helps determine the potential revenue and market share a company can achieve. The [[Serviceable Obtainable Market (SOM)]], or just Target Market, further refines the SAM by identifying the portion of the market that a company can realistically capture within a specific timeframe. SOM takes into account the company's resources, capabilities, and competitive positioning, focusing on the most accessible and likely customers. This involves analyzing factors such as brand recognition, marketing reach, and sales capacity. By understanding SOM, entrepreneurs can set realistic sales targets and develop strategies to penetrate the market, ensuring that their efforts are aligned with achievable goals. Finally, it is important to conduct a back-of-the-envelope calculation to assess whether pursuing this business opportunity is feasible. This involves estimating potential revenue for the first few years and comparing it against the resources and effort required. Entrepreneurs should remain cautious of overly optimistic market size estimates and validate their assumptions through customer interactions and market research. By understanding TAM, SAM, and SOM, startups can make informed decisions about their business model and strategy to ensure they are targeting a market with sufficient potential for growth and success. ## Activities - Watch the video [Market Opportunity Analysis](https://youtu.be/CHh49_ZtY8I) ([[Udacity - How to Build a Startup]], Lesson 4.11) - Watch the video [Total Available Market](https://youtu.be/_-N5u7i_Vgk) ([[Udacity - How to Build a Startup]], Lesson 4.12) - Watch the video [JerseySquare Market Size](https://youtu.be/xaoHNAGn1dg) ([[Udacity - How to Build a Startup]], Lesson 4.13) - Watch the video [Market Size Summary](https://youtu.be/QBfLsXhRYPc) ([[Udacity - How to Build a Startup]], Lesson 4.14) Back to: [[What Will Be Your Unique Value?]]