Building From Idea To Business, Part 3: Finding TAM and Building an MVP

Now, let’s talk about TAM (Total Addressable Market).

Find Your TAM With Customers

In my opinion, your customer interviews are the best opportunity to understand TAM. I’ve seen so many pitches where someone will come in and say the market for shoes is thirty billion dollars. Then they go on to say they plan to capture 5 percent of it. Where did they come up with that number?  Just spitting out a number is not interesting or informative. In fact, people that want to invest in your company want to learn something from the experience. 

So ask every customer you talk to how much they would pay for your product. Essentially, this is value-based pricing. In fact, there’s no better source of truth than a customer telling you I would pay $200 for it. After asking enough people you can build a model to understand the optimal price for the product. Doing so prevents you from making these fast leaps in your mind that go from accurate to inaccurate without you realizing it. 

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Rule of Thumb For MVP

Have you seen a duck when it’s swimming in a lake? It looks so calm, it looks elegant and it’s floating. On the other hand, when you take a snapshot of the duck’s legs underwater, the water it’s so frenetic. That’s what startup MVP’s are like. Our MVP was screenshots of a product that doesn’t exist. 

Our wireframes that were used in customer interviews were built in PowerPoint. We’d ask customers if we were to build this would they buy it, and how much would they be willing to pay? The first answer was yes followed by a price they’d be willing to pay. This process was how I created a successful MVP. 

People get really hung up on thinking they need 10 engineers to build the best product in the world. You don’t need 10 engineers. You are overthinking and over solving. At this stage, nobody cares about your product. First, figure out the output and show that to a customer. Then find the cheapest possible way to deliver that result, and that is your MVP. 

Product people care a lot about products. Sadly, nobody else does. People care about how they feel and what they get- not how cool the product is, or how intricate and complicated it is. Please don’t build a product when you’re in the MVP stage. Your MVP should be a non-product. Take that as a challenge in any job no matter how many engineers you have in your team.