How to Know What’s Actually “Addressable” in the Total Addressable Market

We sponsored a pitch competition over the weekend at UCLA in the style of Shark Tank.

It’s amazing to see what young entrepreneurs come up with: brain scanning technology that tells you what’s really going on inside people’s heads, validating carbon capture by tying it to crypto, and an app powered by AI that automatically filters out restaurants without vegan options.

In short, we were impressed! Inspired by their ideas of innovation and excited by the energy they channeled into their pitches.

But, one particular type of slide was so consistently a big miss we decided to make a whole post to address it.

Yes. It was the dreaded TAM slide.

Why You Need a TAM Slide

TAM just means “total addressable market.” It is important to include — we need to understand what sort of upper ceiling there is on your sales. When I Google the acronym, this is what generally comes up:

Funny. This exact image of concentric circles was used over and over in the pitch competition. If someone was in the “drink” market, for example, they told us how many untold jillions of dollars hypothetically made up that market. If they could just capture 1% that’s still 10 zillion bucks!

Of course, the problem is that when you have a market that big, it’s dominated by massive companies like Coke. You likely couldn’t take any portion of their sales, and on the off chance you could, they will make your product, except cheaper, and crush you like a bug with only their breakroom coffee budget.

But let’s not give up on this slide just yet. You need to have a TAM slide. But you need to make it meaningful. How do you do that?

By mixing it into your story instead of plopping it in there.

“But, Therefore…” Instead of “And, Then…”

The creators of South Park have distilled storytelling into the most basic rule:

“If we take the beats of your outline, and the words ‘and then’ belong between those beats… you got something pretty boring. What should happen between every beat you’ve written down is the words ‘therefore’ or ‘but’.”

You can watch the full clip of their writing advice to NYU students here.

The problem with the TAM slides in the competition is not that they weren’t needed. We did need to know about the size of their market.

It’s just that they weren’t meaningfully connected to what came before. Instead, they were plopped in there because they read on the internet that they needed a TAM slide. Boring!

In contrast, one of the pitches that did it right mixed the market into the story. For example (paraphrasing their story):

1. Marijuana is a massive and growing market
2. BUT, smoking marijuana makes people’s heart race
3. THEREFORE, we created a gummy that is proven to reduce that problem with our uniquely qualified team (our unfair advantage)
4. BUT, the supplement market is difficult to break into
5. THEREFORE, we are specifically targeting medicinal marijuana smokers, who are typically more concerned about their health

You can see that the TAM of various markets are mentioned in 1, 4, and 5. But they are all woven into the fabric of the company’s situation and unique strengths, rather than being plopped – “And then…” –  into the middle of a deck with no context.

Properly weaving the TAM into your story can not only improve your pitch, it can create clarity around your entire business model. We’ve seen entire businesses pivot their strategy completely after doing this one simple exercise! It can be deceptively powerful.

If you’re having trouble figuring out how to include your TAM slide without making it a complete non-sequitur, reach out to us.