WTF is your TAM?

Why knowing your "Right Now" Total Addressable Market drives success

I see it again and again and I bet you have too. A slide deck for a new product with huge numbers on the total market size. HUGE numbers. Billions! Trillions! A Total Addressable Market (TAM) so massive it’s a no-brainer opportunity. Even better, you can create a whole new market that didn’t exist before and you have a monopoly and an unlimited number of buyers for your offering! Limitless TAM!  

Of course, TAM is one of the first questions investors ask about and they want to see huge numbers. But here’s the thing: Your TAM is theoretical. It might make sense in theory, but in practice there is a disconnect between the massive numbers shown to potential investors and the reality of turning them into paying customers. I’ll outline below how to identify your Right Now TAM and how I’ve boiled the ocean to actually find the companies and names of prospects for the companies I've worked for including Framer and Revinate.

“In theory there is no difference between practice and theory. In practice there is.” 

You’ve done some research and you think you've identified your Total Addressable Market. You’ve convinced yourself the market is big enough to make it worth building your product and maybe you’ve raised some funding on the back of this TAM. So now what?

First you need to identify your Right Now TAM. Right Now TAM is identified bottom-up in your funnel by first identifying the Product Market Fit use cases. Who uses your product? Who is using it more and more? Exactly what type of company? What are the roles at these companies using your product for exactly this use case? And, ideally, which company is BUYING MORE of your product? Companies buying more of your product will have a higher Life Time Value and they won’t churn. Adding more prospects into your funnel without a clear use case may work. You could even convert these into customers and you’ll get some short term growth. But in truth you’re really just deferring pain when they churn in the future. 

Your Right Now TAM is your product's use case that is successful and repeatable and is the entry point of the first sale into the prospect/company. If you want a successful business, you want to feed this TAM into the top of your funnel.

But how do you boil the ocean to actually get the names of the people who will buy your product? I’ve outlined a few basics in this article - It’s time to Start Selling. Turn your SaaS into a Revenue Machine - The initial steps are mainly focused on learning whether you have product market fit and whether you can build a sales engine for your product, but as soon as you want to scale you need to add your TAM to the top of your funnel.

I’m fascinated at how little this topic is discussed. I guess it isn’t very sexy, but buying lead lists (or using software that allows you to sort through lead lists and drop them into a sales funnel) is a booming industry but this ‘one size fits all’ list of data is not how successful companies like Revinate and Framer approach distilling their TAM number into actual prospects, sales leads and revenue.

Getting your TAM to come to you - Driving inbound leads at Framer

Most SaaS startups use content marketing and advertising to drive inbound leads. This is ideal because if you do it right your Total Addressable Market comes to you and you can calibrate your marketing spend by advertising in the right channels and get leads that you can score based on conversion rates. Then, it becomes an easy math equation linking your marketing spend and Customer Acquisition Cost (CAC) to Life Time Value (LTV).

At Framer the Growth Team does this remarkably well. While I was leading the sales team in the early days, the sales reps had more leads than we knew what to do with. We built a beautiful funnel with the Growth Team driving inbound leads in the form of free trials and personal subscriptions. My Sales Development Representative team would manually sift through these leads daily and route the High Priority Targets (HPTs were individual users at prospect companies) out to sales reps who would take them through the sales funnel and convert into Team/Enterprise Accounts. I can’t disclose all the numbers or the secret sauce that led to our early success at Framer (much of it is found here - $24m Series B: 11 Months from A to B - but the level of inbound demand creation the Growth and Content team built is a work of art. I’m proud of how disciplined the Growth and Sales Teams were on executing the engine with a systematic and scalable approach moving leads through the funnel from prospect to customer.

This volume of inbound leads and the execution of an inbound funnel on this scale is ideal, but it’s very rare as companies like Framer have built up an incredible brand, community and reputation over a few years.

Even if you have a huge level of demand you have to test the outbound channel of lead generation efforts into a sales funnel and in the early days outbound prospecting is the fastest path to revenue.

Building the outbound Total Addressable Market machine at Revinate

Yes, you can start from zero. In the early days of Revinate we had no inbound leads. And yet, we scaled from zero revenue to massive growth that led to $45m in funding in just a few years. Often, the challenge with content marketing and advertising especially in the early days when you’re the first market entrant is that nobody knows your product exists and prospects ARE NOT LOOKING FOR YOU. In these cases you do need to play the long game and educate the market, but in the short term you need to identify the prospects in your TAM and get your value proposition and use case in their faces asap.

I started at Revinate as an advisor in NYC (the company is HQed in SF) and on nights and weekends I would meet General Managers of hotels and show them our software. It was less about selling and more about a Product Market fit exercise to determine strength of fit and what the target market actually looked like. Our TAM was all hotels in theory but in practice I needed to meet the actual prospect hotels myself and see what they thought of the product. Hotels started buying the software at price points and conversion rates that justified a sales force and I joined as the first sales rep/leader one man band. This process proved Product Market Fit and it was the beginning of a repeatable, predictable and scalable sales engine, but now we needed to build an outbound engine for our Total Addressable Market - Every.Hotel.In.The.World.

Boiling the Ocean of Total Addressable Market into Actual Leads

We knew that if we could get our value proposition into the faces of our prospects (General Managers of hotels) we could scale rapidly. We’d built the initial revenue engine and it was time to feed it TAM and hire reps. Quickly we realized we needed to get General Managers into demos with myself at first, and then our sales reps once I built a team, but HOW?

There was no lead list of every hotel in the world or even in the US with every General Manager’s email and phone number listed. We also realized that just because a hotel looks like it’s independently owned and operated, many hotels are a part of larger management companies and even brands most people have never heard of… this complicated things as only independently owned and operated hotels OR management groups/brands would buy our software, but not the individual hotels under a management group. This was massively complex with no way to know if a hotel is operated on their own or by a separate company. We couldn’t tell if a hotel was a prospect or not and there were no lists or ways to automate the collection of this TAM.

So I hired SDRs and WE CALLED EVERY HOTEL IN THE U.S. We would go by city and using Tripadvisor we called every single hotel. Same questions over and over for months. God bless the SDRs. “Are you part of a management group?” If they said yes we’d ask which management group and then add that to a lead list and route that to the enterprise reps who sold to management groups. If the hotel indicated they were independently owned and operated we would ask just 3 questions: Who is the general manager? What is her or his email? What is her or his phone number? “Thank you and Good Bye”. Boom, our Right Now TAM and our lead list. This system led to explosive growth for Revinate and many of the reps who built that system are still there. As we gained more resources and as technology advanced I hired a B2B Growth scientist and we automated much of this process for our TAM outside the US.

Total Addressable Market is not Sexy, but it’s a secret weapon

Every company should know their Right Now TAM as the Right Now TAM unlocks the entire sales funnel. You can’t pour your theoretical big-number TAM into the top of the funnel without boiling it down to actual leads or your TAM remains forever just a theoretical number and not something you can operationalize.

Hacking together the list of prospect leads with names, titles, email addresses specific to your business can weaponize your sales funnel. It’s nuclear power.

In other articles I’ve written about how revenue is freedom and how getting to revenue means actually doing sales, but if you want to turn your startup into a revenue engine the first part of scaling a sales engine is feeding the engine with your Right Now TAM.

Because I need TAM data when I build sales engines for startups, my friends and I built a system that we can calibrate based on the unique aspects of a specific TAM and we use our system to narrow TAM down to micro data levels that allow us to know whether the prospect is in the target market for the product. This allows for much more targeted and better converting leads going into the top of the funnel. I’m curious to know how valuable this would be for others, so if you’re working in a tough market and you understand the value of having access to your TAM date we can test the system and see if we can boil the ocean and serve up the companies, titles, names, email addresses of every prospect in your Right Now TAM.

As always comments welcome and if you want to email me I'm at [email protected]