- By: Mark Jakobsen
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Getting to grips with your total addressable market
Your total addressable market is the overall revenue opportunity that exists for your product, service, or solution. It represents the maximum potential demand under ideal conditions without considering constraints or competition.
The last bit is the important bit. You’ll see why when we get on to the serviceable addressable market and the serviceable obtainable market.
How do you calculate your total addressable market?
Traditionally, the total addressable market is represented in terms of revenue. To calculate your total addressable market, you need to consider the total demand for your product, service, or solution if every customer in your target market purchases at the maximum price. However, it is possible to express it in other terms like number of customers. Whichever way you choose, we would recommend the same way as your internal business targets. For example, if you are aiming to get 30 new customers this year, show your total addressable market as customers, not revenue.
Going about calculating your total addressable market is the tricky bit. And it’s important to remember it is an estimation, not a fact. To do it, you will need to access industry and market reports, government statistics and other resources (like associations) that have information relating to your customer base.
By marrying up this information with your customer personas, you can estimate the complete size of your market. You can also understand the size of each segment (made up of your customer personas) within the total market. Through this in-depth view, you will see how you are performing in each segment, allowing you to refine your strategy and focus where needed.
Uncovering your serviceable addressable market
While it is important to understand your total addressable market, chances are you won’t be able to target everyone in it. Which is why we need to narrow the scope down a little. Welcome to the service addressable market.
If you need a hand understanding your total addressable market, get in touch and we would be happy to talk it through with you.