I created a $100M empire...using this (TAM) formula Ep 318

Summary Notes


In this insightful discussion, the host is joined by a business growth expert who delves into strategies for expanding a company's total addressable market (TAM) once it hits a growth plateau. The expert outlines three main approaches: going upmarket to serve larger entities, expanding adjacently to related markets, and venturing downmarket to offer services to a broader, albeit lower-paying, customer base. Each strategy comes with its own set of challenges and considerations, such as adjusting the nature of the business, pricing, and service delivery. The expert emphasizes the importance of not mistaking channel bottlenecks for market limitations and advises careful deliberation when shifting market focus to avoid operational complexities. The conversation concludes with a call to action for listeners to support the podcast by leaving reviews to help more entrepreneurs.

Summary Notes

Introduction to Business Growth Strategies

  • The podcast focuses on strategies to increase customer base, revenue per customer, and customer retention.
  • It also covers overcoming failures and learning from past business lessons.
  • The importance of understanding and increasing the Total Addressable Market (TAM) is highlighted for businesses reaching significant revenue milestones.

Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe.

This quote sets the stage for the podcast's focus on growth strategies and learning from past experiences to improve business practices.

Understanding Total Addressable Market (TAM)

  • TAM refers to the total market demand for a product or service.
  • Knowing the TAM is crucial for businesses aiming to sell or attract investments.
  • A larger TAM indicates a bigger opportunity for growth but also suggests changes in delivery and prospecting.
  • Increasing TAM should be approached carefully due to its implications on business operations.

If you've reached a point and you were focused on a niche, right, and you're getting to the 1 million or 3 million or $10 million mark, there may be a time when it might be time for you to increase the so the size of your total addressable market, which the shorthand for that is Tam.

This quote emphasizes the importance of TAM for businesses that have grown within a niche and are looking to expand further.

First Strategy: Going Upmarket

  • "Going upmarket" involves targeting higher-end customers or larger organizations within the industry.
  • Serving associations, franchises, or licensors instead of individual units can increase leverage and contract size.
  • This strategy is most effective for businesses with proven results, experience, and valuable systems or processes.

So the first way is to go upmarket. [...] Above it would be the organizations or conglomerates of these people that I currently have. So can I go after associations? Can I go after franchises? Can I go after licenses or license ors of this type of business model by doing that and serving those people, I now have changed the nature of my business.

This quote describes the process of going upmarket as a method to increase TAM by targeting larger entities that oversee smaller individual units, such as salon owners.

Second Strategy: Going Adjacent

  • The details of the second strategy were not fully discussed in the provided transcript.
  • "Going adjacent" likely refers to expanding into markets or offering products/services that are related to the core business.

Speaker C mentioned "the second way to increase your tam is to go adjacent," but the explanation was cut off, indicating that this is a potential strategy but lacking details on its execution or considerations.

Considerations and Personal Experience

  • Speaker C plans to discuss three ways to increase TAM along with considerations and personal insights.
  • They intend to share their own experiences, including what they would have done differently in hindsight.

At the end, I'll show you the ones that we've done and what I would have done differently, et cetera.

This quote suggests that Speaker C will provide practical examples from their experience, offering insights into the effectiveness of different strategies for increasing TAM.

Expansion by Going Adjacent

  • Exploring adjacent markets can increase the total addressable market (TAM).
  • Adjacent markets for salon owners could include manufacturers of salon equipment or related businesses like nail or lash salons.
  • The strategy involves leveraging best practices from the original market to similar verticals.

"If I'm serving salon owners, excuse me, if I wanted to go adjacent, there's a couple of different ways I could do this."

This quote introduces the concept of expanding a business by targeting adjacent markets that are similar to the current one.

"So it's carving out these little vertical stripes that are close enough to one another that a lot of the best practices that you've already learned probably apply."

The quote emphasizes the strategic advantage of moving into adjacent markets where existing knowledge and best practices are still relevant.

Increasing Total Addressable Market

  • To increase TAM, businesses can explore different strategies such as selling physical products or going direct to consumer.
  • Transitioning from serving salon owners to nail salons is an example of a direct adjacent jump.
  • Identifying and overcoming bottlenecks in marketing channels can facilitate growth within a large market space.

"The most direct adjacent jump would be going from helping salon owners to helping nail salons."

This quote exemplifies how businesses can make a direct adjacent jump to increase their TAM by moving to closely related markets.

"You might have an artificial bottleneck, so you feel or you perceive, like you can't grow anymore within that space."

The quote addresses the perception of growth limitations within a current market and the potential to expand by shifting strategies or marketing channels.

Going Down Market

  • Going down market involves targeting a broader audience with potentially lower-priced offerings.
  • The speaker has personal experience with this strategy, which they did not favor.
  • The approach may not be suitable for all businesses and can depend on the entrepreneur's experience and preferences.

"All right, the third way that you can do this is to go down market."

This quote introduces the concept of going down market as a strategy to expand the customer base by appealing to a different segment of the market.

Call to Action for Podcast Support

  • The speaker does not run ads or sell products on the podcast and asks for support through ratings, reviews, and shares.
  • The intent is to help more entrepreneurs by spreading the knowledge shared in the podcast.

"Real quick, guys. You guys already know that I don't run any ads on this, and I don't sell anything."

This quote highlights the speaker's approach to the podcast, which is focused on providing value without direct monetization through ads or sales.

"The single thing that I ask you to do is you can just leave a review."

The quote is a direct request from the speaker to the audience, asking for support in the form of podcast reviews to help reach and assist more entrepreneurs.

Going Down Market

  • Discusses the concept of targeting a market segment one level below the current customer base.
  • Examples include selling to hairstylists or nail technicians if one originally serves salon owners.
  • The idea is to offer a product or service that enables the lower market segment to improve their services or charge more, e.g., through a certification or proprietary system.

If I were going down market, then I would be serving hairstylists, right? So what's one level below the person that I'm currently serving? It would be hairstylists or actual nail polished people.

This quote explains the concept of going down market by serving a customer base that is one level below the current target market, in this case, hairstylists and nail technicians instead of salon owners.

Pricing Strategy

  • Discusses the pricing strategy in relation to serving different market segments.
  • Suggests that when going down market, pricing might be about 1/5 to 1/10 of the current charges.
  • Conversely, when targeting upmarket, prices could be 5 to 10 times higher.

Now, typically, what happens if you're thinking about this from a pricing perspective? This is what you're normally charging. This is probably what you're charging times five to ten... And this is what you're charging, probably divided by five to ten.

The quote highlights the general pricing adjustments that might occur when targeting different market segments, with down market being significantly cheaper and upmarket being substantially more expensive than current prices.

Market Positioning as a Pyramid

  • Describes the market structure as a pyramid with different levels.
  • The current position is at the middle, with down market at the base and upmarket at the top.
  • It is suggested that most businesses find themselves in the middle position, facing an artificial bottleneck.

And if you think about this, this is much more akin to a pyramid, right, where you have. Where you're currently at, you have your down market... And then you have your up market right on the top of that.

This quote visualizes the market structure as a pyramid, with the speaker's current market position in the middle, potential down market at the base, and upmarket at the peak.

Overcoming Bottlenecks

  • Discusses strategies to overcome bottlenecks in customer acquisition.
  • Suggests adding another channel or increasing the lifetime gross profit per customer to afford more marketing.
  • Differentiates between back end and front end solutions, depending on the business's situation.

And most times what you're encountering is an artificial bottleneck. You just have maxed out this particular stream of getting customers... One is by adding another channel. The other way would be increasing the lifetime gross profit per customer.

The quote explains that businesses often face bottlenecks in customer acquisition and offers solutions such as diversifying channels or increasing customer lifetime value to overcome these challenges.

Market Expansion Examples

  • Provides examples of market expansion using a gym business.
  • Down market expansion would involve serving personal trainers, while upmarket would target franchisors.
  • An adjacent market could be the online fitness business, which can vary in size relative to the gym business.

So we serve gym owners in one of our portfolio companies, gym launch. If we wanted to go down market, it would be helping personal trainers. If we want to go upmarket, it would be helping franchisors make more money with their franchise within that space.

This quote gives a practical example of how a company serving gym owners could expand both down market and upmarket, as well as move to an adjacent market.

Transitioning Offer Types

  • Discusses transitioning from an improvement offer to a new opportunity offer.
  • Suggests that this can make the business more appealing to client acquisition-focused audiences.
  • The new opportunity offer positions the service as a business opportunity rather than just an improvement.

If you are in some way involved with client acquisition... one of the ways that you can make your opportunity appeal to more people is by transitioning from an improvement offer, which is where you help people do better within the thing that they are doing to a new opportunity, being a business opportunity.

The quote suggests that businesses can attract more clients by shifting from offering improvements within a client's current operation to offering a new business opportunity, thereby broadening their appeal.

Business Opportunities and Market Positioning

  • Discusses alternative options for individuals unhappy with their current job or business vehicle.
  • Suggests a business opportunity (bizop) as a viable alternative with a low barrier to entry.
  • Notes a correlation between the level of the business opportunity and the quality of the prospect.

If you have a better way of doing it that doesn't have a huge barrier to entry, then that can be a viable, I would say, like option 3.5 is bizop.

The quote suggests that if there is an innovative approach to business that is accessible, it could serve as a feasible alternative for those seeking change, referred to as "option 3.5."

Selling to Different Tiers of Professionals

  • Differentiates between selling to individual professionals versus owners and franchisors.
  • Emphasizes the importance of recognizing parallels across industries.
  • Suggests that the level of the client in the industry hierarchy affects sales strategy.

When you are selling somebody who's a hairstylist or a personal trainer or a real estate agent.

This quote begins the comparison of selling to individual service providers as opposed to higher-tier professionals or business owners.

Vertical Integration

  • Defines vertical integration as owning all aspects of a supply chain.
  • Provides an example of a vertically integrated business in the fitness industry.
  • Mentions the possibility of owning adjacent aspects such as processing, CRM systems, and physical products.
  • Vertical integration is presented as a way to increase the total addressable market and sales volume.
  • Warns of the increased operational complexity that comes with vertical integration.

Vertical integration. And what that means is actually owning all aspects of this supply chain.

This quote defines vertical integration and sets the stage for explaining its significance in business strategy and market expansion.

Operational Complexity and Market Bottlenecks

  • Advises caution when making changes to a business model due to the operational complexity.
  • Highlights a common entrepreneurial mistake of misinterpreting channel bottlenecks as market size bottlenecks.
  • Suggests ways to debottleneck a business, such as increasing lifetime growth, profit per customer, or adding new channels.

It's one of the number one issues that I see.

The quote identifies a frequent misconception among entrepreneurs regarding the constraints they face, emphasizing the importance of accurately assessing the nature of bottlenecks.

Market Expansion and Pricing Strategy

  • Discusses the strategic considerations of moving upmarket or downmarket.
  • Stresses the need to adjust pricing and expectations when targeting different market segments.
  • Shares a personal experience of a mistake made when going downmarket without adjusting the service level to the pricing, leading to non-viability.

You can't go upmarket and just charge twice as much because there's so many fewer of those customers and they're going to expect a lot more and to the same degree.

The quote highlights the challenges of adjusting prices and services when shifting market focus and the importance of aligning these with customer expectations and segment size.

Conclusion and Call to Action

  • Speaker C concludes by expressing hope that listeners found the discussion valuable.
  • Encourages listeners to consider the strategies discussed to overcome growth plateaus.
  • Ends with a prompt to subscribe for more content.

Hopefully this makes sense to you. Hopefully you found value in this. Click subscribe and I'll see you guys in the next video. Bye.

The quote wraps up the video with a summary of intent, hoping the content was valuable, and includes a call to action for audience engagement.

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