WEBVTT 00:00.110 --> 00:01.220 With this video. 00:01.220 --> 00:06.110 Let's begin the section of the course in which we're going to take a detailed look at how to calculate 00:06.110 --> 00:07.460 your target market. 00:07.460 --> 00:12.230 And it's a slightly complicated process because there are multiple ways to do it. 00:12.230 --> 00:16.970 There is the Tam total addressable market, the overall market. 00:16.970 --> 00:20.720 Then there's the Sam serviceable addressable market. 00:20.720 --> 00:24.740 Then there's the Som serviceable obtainable market. 00:24.770 --> 00:30.230 We're going to go through these definitions with examples in the coming videos, so that by the end 00:30.230 --> 00:32.420 of these videos, these are all clear to you. 00:32.420 --> 00:37.940 And the one I want to start with is your great overall market. 00:37.940 --> 00:41.420 That's the Tam total addressable market. 00:41.420 --> 00:51.710 There are a few different ways of calculating even that, because sometimes you might have big research 00:51.710 --> 00:57.440 studies done by giant research firms, and they might do a study like this is the overall market of 00:57.440 --> 01:02.330 the e-learning, the size of the e-learning market or the automotive market. 01:02.330 --> 01:10.230 And when they research such gigantic markets, That makes our life a little bit easier because they 01:10.230 --> 01:11.910 tell us what the Tam is. 01:11.940 --> 01:15.090 They tell us what the overall value of the market is. 01:15.120 --> 01:18.030 There's nearly zero calculation we have to do. 01:18.030 --> 01:21.060 All we have to do is just Google for recent study. 01:21.090 --> 01:26.940 You punch in the year study for what is the size of the automotive market or automotive market. 01:26.940 --> 01:28.740 And you'll get that data. 01:28.980 --> 01:37.110 But very often our products aren't exactly a fit for this kind of a research. 01:37.140 --> 01:41.250 For example, let's say you're starting a restaurant in your local town. 01:41.430 --> 01:46.860 It doesn't help you at all to know what the total addressable market is. 01:47.340 --> 01:54.630 So what that that you don't care about the global metrics of the restaurant business that's not relevant 01:54.630 --> 01:55.920 for your local town. 01:55.950 --> 01:56.970 Totally useless. 01:56.970 --> 02:04.770 And because of that, there is such a calculation as a bottom up approach and a top down approach. 02:04.800 --> 02:06.300 Let me explain how they work. 02:06.990 --> 02:09.900 The easiest to understand is the bottom up. 02:09.930 --> 02:11.840 Let's say you have a restaurant. 02:11.930 --> 02:16.430 Your total addressable market is people in your city. 02:17.180 --> 02:20.600 So maybe it's a million people. 02:20.600 --> 02:29.420 And on average, let's say they spend $100 a year going out to restaurants. 02:29.450 --> 02:30.200 Okay. 02:30.590 --> 02:35.660 A million people times $100 that each person spends. 02:35.660 --> 02:36.980 You multiply that. 02:36.980 --> 02:39.110 That's your total addressable market. 02:39.110 --> 02:39.920 Very easy. 02:39.950 --> 02:40.670 Done. 02:41.180 --> 02:45.710 It's not always so straightforward to understand what is the user base. 02:45.710 --> 02:54.620 For example, when I had a mobile app for business planning, I had to go and calculate like the top 02:54.620 --> 03:02.780 30 apps in business, how many downloads they're getting and what is the average earning per user. 03:02.780 --> 03:04.820 It wasn't so clear and dry. 03:04.850 --> 03:07.520 But in any case, this is the bottom up approach. 03:07.550 --> 03:08.930 You're just getting the metrics. 03:09.740 --> 03:11.690 How many people are there? 03:11.690 --> 03:13.220 What's the average spend? 03:13.250 --> 03:19.200 Multiply it and you get your Tam total addressable market you're not going to capture all those people. 03:19.500 --> 03:22.260 That's why it's the total overall market. 03:22.260 --> 03:25.230 This is the biggest possible market that you can reach. 03:25.320 --> 03:32.640 Now the other way to calculate your Tam total addressable market is the top down approach. 03:32.670 --> 03:34.350 It feels just like it sounds. 03:34.350 --> 03:35.640 You go from top to bottom. 03:35.640 --> 03:40.320 So if you are let's say you have a language learning product okay. 03:40.320 --> 03:45.690 So language learning, you look it up, you Google and you look up studies for this year. 03:45.690 --> 03:48.480 What is the size of the language learning market overall? 03:48.570 --> 03:50.940 And let's say it has $10 billion. 03:51.390 --> 03:52.080 Great. 03:52.290 --> 04:00.600 But maybe your product only targets a segment of the overall users. 04:00.600 --> 04:05.850 Like some customers like to learn from books, like actual physical books. 04:05.850 --> 04:08.970 Some of them like to learn from a coach. 04:08.970 --> 04:10.830 Some of them like to learn from an app. 04:10.830 --> 04:12.750 So let's say you have an app. 04:12.750 --> 04:15.450 Well, you're only going to target a segment. 04:15.480 --> 04:18.810 You're not you're not getting the people who want to study from books. 04:18.810 --> 04:27.080 So suddenly you think, okay, the app market is 10% of the overall market, and it probably will tell 04:27.080 --> 04:29.360 you exactly that in that same research study. 04:29.390 --> 04:32.810 It usually tells you of the segmentation. 04:32.960 --> 04:38.750 That's a very common thing that those big research studies show you and you see, oh, okay. 04:38.780 --> 04:41.330 You know, the market for mobile apps is 10%. 04:41.330 --> 04:45.560 So the overall language learning market is 10 billion. 04:45.590 --> 04:48.140 10% of that is 1 billion. 04:48.140 --> 04:52.970 And so that's my ten very easy calculations. 04:52.970 --> 04:55.370 You don't have to get it to the dollar. 04:55.550 --> 04:57.230 They are approximations. 04:57.680 --> 05:01.580 But the closer the closer you are the better. 05:01.580 --> 05:07.070 But this is essentially how to calculate your total addressable market. 05:07.100 --> 05:17.750 The problem with the total addressable market is that we cannot serve all the people in even those addressable 05:17.750 --> 05:18.500 markets. 05:18.500 --> 05:23.000 So we have to look at total serviceable market. 05:23.210 --> 05:25.550 That's people who you can service. 05:25.640 --> 05:28.820 And that's what we're going to explore in the next video.