Show Notes for episode #9
In a world flooded with acronyms, here’s one more for you – TAM: Total Addressable Market.
A couple of years ago, MIT Bootcamps published a series of six short videos on YouTube to help us better understand TAM. In this episode, we explored a clip from that series where Bill Aulet, Senior Lecturer at the MIT Sloan School of Management explains what TAM is… and where Amanda von Goetz, MIT student & CEO of Thyme Labs explains why this matters for business startups.
Here’s the full video clip: What is Total Addressable Market (TAM)?
Admittedly, TAM in the context of MIT applies to much larger enterprise, but there are things we can glean from these lessons.
Let’s say you’re starting up a Supply Chain consultant practice and you’re looking to focus on customers within a 50-mile radius of your home.
- Calculating the number of companies that fit your profile would be a great starting point –for a supply chain consultant, this might be the total number of manufacturers and distributors within a 50-mile radius.
- Then you move on to calculate the dollars. It might be average spend per customer engagement. That’s the trickier part – but take a stab at a benchmark. You can always adjust it later as you learn more. LinkedIn, Hoovers.com and industry directories are great data sources to explore to identify potential customers.
So for this Supply Chain Consultant example (I’m going to keep the math simple here): Let’s say there are 100 companies that match your target profile within a 50-mile proximity of your home and you’ve estimated average spend per client at $10,000…
You’d multiply 100 by 10,000 – arriving at a total addressable market of $1 million.
Now keep in mind, you’re not some big conglomerate, right? You’re a humble, yet talented part-time consultant who’s looking to invest only so many hours each week. By the way, you’ll want to guestimate total hours required for an average consultant engagement. Again it’s a benchmark you can test and fine-tune as you go, but this concept of TAM will be helpful as you assemble your business plan.
Our brains are hard-wired to favor people who agree with us, which explains why we tend to gravitate towards like-minded people. But there are some dangers when we give into this inclination. We may think we’re taking the fair and balanced path, but confirmation bias can quietly slip in and skew our vision.
In this episode, we shared a clip of Bo Bennett from The Dr Bo Show, explaining how confirmation bias might play out using an everyday example we can all relate to — selecting a cable company. Here’s the full video clip: Confirmation Bias
And now for a big revelation I had this week – my vision was definitely skewed more than I realized by confirmation bias. I was largely reaching out to fellow Boomers (my target audience) to road test my business plan and collect feedback and suggestions. It wasn’t until I spent an hour with the amazing students in a John Carroll University data class that I realized the flaws in my thinking.
These savvy students were looking at my business plan from a completely different vantage point and they saw things I didn’t see. They poked at a few of my blind spots and together, we emerged with richer and more actionable insights.
We often think of Mentoring in the context of older/wiser sages dispensing knowledge, stories and advice to the youngen’s. But the most valuable mentoring models move up and down the generational ladders. It’s intergenerational.
Debra is Creator & Wellness Director of Hamptons Home Spa. She’s a certified wellness coach and her holistic skin and body work addresses the “issues in your tissues.” As the self-proclaimed ambassador of wellness in Sag Harbor, Debra brings her own integrative style of holistic health consciousness to clients and visitors of the Hamptons.
In our chat, we explore why wellness matters for Retirepreneurs, plus we wrap up with thoughts about how this career path might be a great fit for your own Retirepreneur pursuit.