WinKnow Your Tam
For VSaaS companies, understanding your "Operational TAM" - not just “handwavy” market size - can be the difference between sustained growth and hitting an unexpected wall.
Founders tend to think about their TAM at exactly two points in their company’s journey: when they are in the midst of a funding round and when they hit the saturation point.
One minute, you’re pounding out locations, adding sales reps, and winning more locations—rinse and repeat. The next minute, the number of at-bats (opportunities to win deals) begins to decline, and your CAC (customer acquisition cost) skyrockets as you exhaust your market. You may need to stop hiring sales reps in your core market. You may even need to reduce reps. More broadly, you need to start thinking about your core business differently.
As we’ve argued previously, your market structure drives your strategy. TAM is relative to your scale; thus, TAM headroom is one of the biggest drivers of market structure. When your location TAM starts to run out, you need to focus on expanding (e.g., increasing ARPU) to sustain growth while you try to find the next S-curve of location growth in a segment, an adjacency, an overseas market, or extending into other stakeholders.
At Tidemark, we try to open-source our thinking as much as possible to help founders win; however, as investors, we can’t give everything away in public. If you’re an operator or founder, you can request access to the rest of this piece below.
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