Running a business requires you to spend a lot of time on the present. The reality is the future potential is equally as important as the past. Buyers measure that future potential in a metric called the total addressable market TAM. Total addressable market quantifies the total annual market demand for your solution in a dollar amount. Simply put, TAM is the total amount of revenue a business can generate selling its product to every prospect or customer that is addressable. Now addressable means that the solution is tailor made or has a use case for that particular type of business. After identifying the number of addressable customers, you just multiply your annual contract value by the number of customers. For example in the real world, if you develop and sell practice management software to legal firms to be used by lawyers and paralegals, your addressable customer base would include all attorneys and legal staff across the globe. Where you can become more exact is by having multiple sources support your claim on how many addressable customers exist.
An Example of Calculating TAM
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Mongolia supplies around 40 percent of the world raw cashmere demand and it is deemed that the domestic production of final cashmere products for exports would increase the economic values by five times and the export revenue alone to reach USD 1. Also, the proposed duty-free treatment by the USA to Mongolia cashmere products and 25 percent duty of China on knitted products are viewed as great opportunities to encourage exports. He also noted that promotion of non-mining exports is one of the main tasks of the MNCCI, for which attracting investment is an essential. The cashmere forum in China served as an important platform for Mongolia and China, which provide 90 percent of the global cashmere together, to talk about each of the cashmere markets and competitions with markets of other countries, define the adequate policy and raise capital. In , the Government of Mongolia launched a cashmere product to expand cashmere production, increase economic profits and create jobs in the cashmere industry and thanks to the program, more than jobs were added.