Your idea is a great starting point but I feel it misses the mark a bit. I’ve been using the TAM/SAM/SOM framework for many years now, and it’s not 100% accurate but it gives the most realistic estimation in my opinion.
* TAM is the full pie - the max revenue you could make if 100% of buyers got your product. Big picture stuff.
* SAM narrows it down to the slice you can realistically serve. Your geographic reach, target industries, ideal clients.
* SOM is your slice of the SAM pie. What you can actually obtain after considering competitors.
For your startup, you’d start by estimating the total demand for outsourcing services in your market/ industry.
Then refine to target industries you can serve, the specific services they’ll use, and realistic usage estimates.
Finally, calculate your attainable SOM based on the formula you described.
You can find a lot of information from industry reports, surveying potential clients, and competitors public financial reports. Let me know if any part needs clarifying. Market modeling done right is complex, but this framework makes it more bite-sized. 😊