Defining the Market for Your Startup

by Dec 1, 2021

Once you’ve identified revenue model(s), now it’s time to discuss customer acquisition and how to get your product into the market. When you’re talking to investors about your startup, you’re going to get asked some questions over and over:

  • “What’s your total market size?”
  • “What’s your beachhead market?”
  • “What’s your go-to-market strategy?”

You need solid answers to these questions in your pitch. Of course, you can’t build a customer-centered business without defining the market where those customers are. And then to get those customers, you need to hit marketing and sales out of the park. Over our next few posts, we’re going to tee you up for success.

Defining the Market

The first step is to define your market: that is, who you’re going to sell to. Spoiler alert! “Everybody” is the wrong answer. You can’t boil the ocean. Narrow it down using criteria such as:

  • Industry sector
  • Type of business or consumer
  • Geography
  • Demographics

Next, think about your market in terms of three levels:

  1. TAM—Total available market (the biggest view of who needs your product or service)
  2. SAM—Serviceable available market (the segment of that market you’re targeting and that’s within reach). In other words, a more realistic slice of that market.
  3. Beachhead market—The market where you’re going to start, which is probably even smaller.

When you get clear on these three levels, you de-risk your startup. Your plan to reach a beachhead market ensures you’ll be successful enough, fast enough to survive. Your SAM and your TAM show the potential to make it big. And when you can show that you’ll start strong and have great potential to grow, investors will take note.

Sample Market Description

Take Blueprint Stats, for example. Blueprint Stats provides statistical film breakdowns to athletic teams. Teams upload video and get back actionable information and searchable film chunks to help improve athlete performance, create highlight reels, and more.

Blueprint Stats’s TAM is the sports media industry. For film breakdown, across all sports, they estimate market size at $4 billion. Their SAM is a slice of that: the $615 million market for basketball breakdowns. Their beachhead market is high school and AAU (amateur athletic union) basketball teams, a market that is underserved, hungry to improve performance, and hasn’t been able to access affordable film breakdowns. That beachhead market is helping prove and refine Blueprint Stats’s model.

(Blueprint Stats didn’t pull the numbers for market size out of a hat, by the way, and neither should you. You’ll need to do some research and be able to explain how you got your numbers.)

A Market Analysis Exercise

Now it’s your turn. Do a little “back of the envelope” market analysis. Jot down:

  • Your rough TAM, SAM, and beachhead markets
  • The revenue model(s) you’ve defined
  • Some possible sales channels to reach that beachhead market
  • What partnerships might help you reach it
  • What marketing tools and opportunities you might leverage
  • Who your competitors are
  • How your competitors market and sell

Next, you’ll work out your go-to-market strategy and the details of how you’ll reach your beachhead market. But first, you need to understand the difference between marketing and sales. We’ll discuss that in our next post.