Forget TAM/SAM/SOM. Answer 2 simple questions to size your market using numbers investors will actually take seriously:
You sell a compensation SaaS to employers and charge per employee. You start in North America.
You charge $100 per employee per year. Your average customer has 250 employees, so your average ARR per customer = $25K
There are 65K employers in North America who are qualified to buy your product (per some credible source)
Your Market Opportunity = $25K x 65K = $1.63B ARR
Segment your customers. For example, by size. Repeat the calculation for each segment and add them up.
You plan to add a second product that should grow average ARR per customer by $20K a year.
Your product expansion ARR = $20K x 65K customers = $1.5B
You plan to expand from North America into Europe. It will add another 50K potential customers. You expect your average ARR per customer to be very similar.
Your geo expansion ARR = $25K x 50K customers = $1.25BTAM, SAM, SOM If you really can't bear the thought of not listing TAM, SAM, SOM in your deck, consider the following:
I haven't found any startup that can't calculate a simple, credible market sizing using this method. Drop a comment if you think you're an exception. I bet I can help.
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