From the course: Sales Operations
Define and size your addressable market
From the course: Sales Operations
Define and size your addressable market
- Imagine you're sitting at your desk, and the head of sales barges in. Brian, I need you to get everyone their accounts! And I need it now! And then he leaves. If you're like most people, you might be thinking, how exactly do I do this? How do I figure out which accounts to sell to, and then divide them up fairly, in a way which maximizes the benefit to my company? Basically, what you're asking is, how do I build sales territories? So let's get into it. Territory planning is essentially just splitting up a market into logical bite-size chunks. And the first step to territory planning is to define and size your addressable market. You need to have a deep understanding of who are your target users, and what is the value proposition of your product to them. That is, who are these users that will benefit from your product. This is the first step towards determining your Total Addressable Market, or sometimes you call it your TAM. TAM is typically calculated for each product category as the total addressable users times the average selling price per unit. Lemme give ya an example. If ya got one million addressable users, and your average selling price is $1,000, that's a $1 billion TAM. Not too shabby. A word of caution here, be sure to define your target users realistically. If you're too broad, and include users with a questionable fit, you may ultimately dilute the effectiveness of the sales resources you deploy. You don't want your salespeople to be distracted, and waste time selling to users for whom there's no compelling product benefit, or clear demand signals. Starting with TAM will help you calibrate the size of the market opportunity, and the appropriate level of resourcing to go after it.
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