?? Aim for a Small but Growing Total Addressable Market (TAM)

This is WorkMatters #334 for Week 45, 2024. It was originally published as an email newsletter on Nov 15, 2024. For more, see www.andreasholmer.com.

File this under #busienssresilience

You’ve heard the saying: “It’s better to be a big fish in a small pond than a small fish in a big pond.” For entrepreneurs, that translates to: “It’s better to be the only player in a niche market than one of many in an established market.”

That sounds reasonable. But how do we square this advice with the fact that VCs prefer companies with large Total Addressable Markets (TAM)? It seems contradictory. Why aim small when investors favor big? Do they know something we don’t?

No, not really.

It’s just a matter of perspective.

Entrepreneurs should go after niche markets. But it’s not the size of the niche that’s important — it’s the growth potential.

The real trick is being the first to recognize a niche that’s poised to expand — spotting a future opportunity that others have overlooked.

In other words, it’s better to be a big fish in a small but growing pond than a small fish in a big and crowded one.

That, or source, doesn’t mean it’s easy.

Jeff Bezos famously said that entrepreneurs must be willing to be misunderstood. When you pursue an idea that others haven’t yet grasped, pushback is inevitable. It’s not enough to simply identify a growth market; you must also be prepared to face resistance and stand your ground.

So, it’s better to be a small and fiercely determined fish in a small but growing pond than a small fish in a big, crowded one.

??

That’s all for this week.

Until next time, make it matter.

/Andreas

How can we build better organizations? That’s the question I’ve been trying to answer for the past 10 years. Each week, I share some of what I’ve learned in a weekly email newsletter called WorkMatters. Back issues are marinated for three months before being published to Linkedin. This article was originally published on Friday, Nov 15, 2024. Subscribe at www.andreasholmer.com to get the next issue delivered straight into your inbox.