Analyse market potential
How big is the market for your idea really? A well-founded estimate shows whether the effort is worthwhile – and it’s the first number every investor wants to see. If you answer with “the market is huge”, you’ve already lost; if you derive TAM, SAM and SOM properly, you come across as professional straight away.
TAM, SAM and SOM – the three market sizes
TAM is the total theoretical market, SAM the part you can reach, and SOM the share you can realistically win in the first few years. This tiering curbs overly optimistic assumptions and turns a wishful number into a credible one.
Bottom-up beats top-down
Don’t calculate “1% of a billion-pound market” (nobody believes that) – work from the bottom up: number of realistically reachable customers × revenue per customer × purchase frequency. Base every assumption on official statistics, industry data and comparable providers – that makes the estimate verifiable.
Direction matters more than size
A growing market forgives mistakes; a shrinking one makes even good ideas difficult. In the UK, the Office for National Statistics, the Department for Business and Trade’s business population estimates and company accounts on the Companies House register are good starting points. planix brings relevant market data directly into the process and helps you derive TAM/SAM/SOM transparently.
Frequently asked questions
Where can I get market data in the UK?
From the Office for National Statistics (ONS), the business population estimates of the Department for Business and Trade, trade associations, studies and the filed accounts of competitors on the Companies House register. planix brings relevant market data directly into the start-up process.
How precise does the market estimate need to be?
Plausible and transparent, not accurate to the pound. What matters are the assumptions behind it – you need to be able to back them up. Better conservative and solid than optimistic and implausible.
Ready to put your idea into action?
Start for free with planix – no registration. Guidance, feedback and next steps, thoroughly reviewed within 24 hours max.
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