Course :EN002 – Entrepreneurship II

Year : 2016

Develop Product Plan

Session 10
F2F
 Learning Objectives

LO 2: Categorize the Business Model and Construct the Business Plan

LO 3 : Assess the business and evaluate the business plan
 Contents

 Calculating the Broader TAM

 The Product Plan
Calculating the Broader TAM
 What is “TAM”?

The TAM for your beachhead

market is the amount of
annual revenue, expressed in
dollars per year, your business
would earn if you achieved
100 percent market share in
that market.
 What Mostly Happened...

It’s not wrong, but just dont get to excited...

 What to DO then?

So far, you have focused on customers in

your beachhead market. At this point in the
process, though, you will take a step back
and briefly and quickly validate the exis-
tence and size of other, similar markets
(“follow-on markets”) that you will target once
you have dominated the beachhead market.

This is important as a check to make sure you are heading in the right
direction to build a scalable business and also a reminder of the size
and nature of the bigger opportunity.
 Two Types of “Follow-on Market

Two Types of “Follow-on Markets:

The First market involves selling the same customer additional products or applications,
which is often referred to as upselling. It is not a new market, considerably as an
established market for the business. The info on this markt could be used to sell new
products as well.

The second market, and the path often

Taken by innovation-based startups, is
to sell the same basic product to “adjacent markets,” which
are markets similar to your beachhead.

Selling to these new markets requires

additional features, product refinement,
and/or different packaging, marketing
communications, or pricing.
The challenge is that you will have to establish new customer relationships in each
adjacent market, which can be risky and expensive.
 What Next?

Before we speak about the

“BROADER TAM”, the first thing
that should be done is identify
some follow-on markets and
determine the Total Addressable
Market (TAM) for those markets.

Why should it be done, and what would

be the benefits for the business? It keeps
you AWARE of the long-term potential of your
Business as you begin to design your product and build capabilities.

You will excite management, employees, and investors by showing that the
business has the potential to be overwhelmingly successful. You
will also get a better sense of other potential markets if your beachhead
market turns out to be much more problematic than you envisioned and you
have to either abandon it or revisit other options.
What Next? (Cont’d)

DO the identifying “follow-

on market, and start
determining the TAM of your
business.

Luckily, you actually have

already had some
information about this, from
the Market Segmentation
process that you have done
earlier.

So, sneak in your database,

and see what would you get
from there!
 Calculate the TAM

First determine how many end users exist that fit your End User Profile using
a bottom-up analysis based on primary market research.
Then, complement this with a top-down analysis to confirm your findings. Then
determine how much revenue each end user is worth per year.
Multiplying the two numbers results in the TAM.

WARNING:
Entrepreneurs often tend to inflate the
TAM with excessive optimism, but a big
number is not necessarily better. The goal
of this exercise is not to impress others,
but to develop a conservative, defensible
TAM number that you have faith in.
 Calculate the Broader TAM

Think through the various adjacent markets and upselling opportunities that
logically make sense with your product. You should be able to identify at least
five or six follow-on markets.

Use the same general

methodology to calculate
the TAM for each follow-on
market that you did previously,
just, this time, it involves more
“follow-on markets”.
The Product Plan
 Before We Go to Product Plan...

We need to learn a little more

about the MVBP.
What is MVBP?
This is the Minimum Viable
Business Product.

The MVBP combines your most

important key individual
assumptions into one integrated
product that can be sold. The
MVBP sets you up to test the
most important overarching
assumption that integrates the
rest
—that customers will pay for
your product.

The product you will build in

this step will meet the three
conditions of an MVBP.
 3 Conditions of MVBP

The customer gets The customer pays

value out of use of for the product.
the product.

The product is sufficient to start the

customer feedback loop, where the
customer can help you iterate toward an
increasingly better product.
 Back to the Product Plan!
The Product Plan you will develop in this step builds on the work you have done in
the TAM for Follow-on Markets.

When you established your MVBP, you most likely took a number of features and
put them on hold to concentrate on the bare minimum feature set required. In the
Product Plan, you will select which of these
features, based on your customer’s needs, to
incorporate back into the product.

There may be features that you thought the

customer would want up front; but as you
further developed your ideas of the product
and customer, you find they are much less
important than other features you did not
consider at first.
 Warning!

The Product Plan is subject to change as you

move forward, so don’t sweat the details
and don’t spend too much time on it.

However you should have a general vision of

where you see things going next so that you
capture some of the broader TAM.
 References

Aulet, Bill (2013). Disciplined Entrepreneurship: 24 Steps to A

Successful Startup. John Wiley & Sons, Inc. New Jersey. ISBN: 978-1-
118-69228-8