Burning through your TAM
Knowing your TAM can be a curse
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At the bottom of this post you’ll get a quick round up on who’s taking the CFO seat at PE-backed companies. Scroll down for the latest from Vialytics, Tailored Brands, and Sunsweet Growers.
Knowing Your TAM Can Be a Curse
I was talking with a CFO the other week who had what most GTM leaders would kill for: a perfectly defined TAM.
His company sells software to independent financial advisors. Think… the money managers that don’t work for big banks like Goldman or Merrill.
Every potential customer is registered with FINRA, 76,000 of them, right there in a searchable database. No guessing. No messy enrichment. Just names and numbers. They can literally pay for a list and dial into all of them.
They know where the bodies are buried.
Sounds like a dream.
But here’s the catch: when your market is finite and findable, it’s also burnable.
Let’s do the math…
We’re starting with 76,000 potential customers. And the market is growing at ~3% per year. To keep things simple, let’s say ~3,000 new potential customers get added to the top of the pile each year.
Say you hire 10 BDRs. You give them a dialer, some decent data, a sleeve of zyn, and a comp plan that gets them to care. Each makes 40 calls a day. 30 go to voicemail, they connect with 10, get to a decision-maker on 5, and book 3 demos. Of those, maybe 2 deals close. Another 8 get ruled out entirely.
That’s 10 resolved accounts per BDR per day, either won or lost.
With 10 reps, you’re ripping through 100 accounts every single day. Do that across a full year (let’s say 220 workdays), and you’ve worked through 22,000 accounts.
But let’s be honest… this isn’t a one-and-done sales cycle. Some of these folks need a second pass. Maybe a third. Maybe they ghosted the first rep and forgot about the pitch entirely. Maybe the ownership changes or the decision maker leaves the company and someone new comes in. So some of the accounts technically get reactivated or reworked.
So let’s say there’s a flux of 20% in and out of the strike zone. That gives you some added runway.
But net net, if you keep your foot on the gas, you’ve burnt through the entire market before year 5.
I had a similar experience working at a company that sold SaaS into independent auto maintenance shops. These were the types of garages you’d go to get your brake pads swapped and oil changed (not the collision shops you go to after hitting a deer).
We estimated there were about 150,000 of them in the US. While it was harder to get their names, numbers, and addresses compared to the independent wealth advisors, they were still pretty findable if you knew how to use google maps or the yellow pages (yes, still around).
While we thought that 150,000 was pretty big, we found there was a crucial decision tree that played out on each qualifying call:
Are you using software to order parts today?
About 1/3 were using software, 2/3 were still using the phone + paper and pen
If you were not, it was going to be hard to change your behavior. It was indeed possible, but you’d have a much lower conversion rate, a much higher learning curve, and a statistically lower utilization rate.
So we’re down to 50,000 eligible shops on software that we can integrate with
If you are using software, do you like your procurement module?
If you are happy, you are disqualified, as you aren’t looking to move to our stuff.
About 50% were happy
Now down to 25,000
If you don’t like your provider, are you locked into a contract?
About 50% were on multi year contracts… 12,500 left
If you were willing and able to move, could you afford what we were selling?
About 50% could
We’re now down to 6,250 serviceable addressable customers… after starting at 150,000
When you Hit the Wall
The first piece of advice is to know where the wall is before you hit it.
And given the example I used above, it’s almost always closer than you think.
Because when you see the wall, there are two good paths you can take (and one bad one).
The first is to move into a tangential market. If you serve gyms, maybe you start making your software applicable to salons.
The second is you find new products to sell into the customers you already have. If you sell them software for keeping track of customers, maybe you add payments to get a piece of each customer’s transaction.
The third option is not a great one, and anecdotally what I heard a well known gym booking solution did based on convos with friends of mine in the space. The software company / marketplace eventually got to a point where a couple of BDRs could rip through every single gym in a city. Even on foot. You knew if all gym owners in Boston were in or out quickly.
But once an account was disqualified it was thrown back into the pool for another rep to grab it and give it a try. This happened over and over and over again. It was like the village trying to pull Excalibur from the stone.
What you end up with is a disgruntled gym owner who’s been harassed every week for two years, and is now 100% never ever going to convert when their renewal cycle is up.
That’s not great for reputational purposes and will eventually get you in trouble with the Better Business Beaurau.
And that’s why it’s so crucial to keep track of your rep productivity metrics when you are operating in a TAM constrained market. You want to make sure you are not spraying and praying, burning potential customers because of a poor and haphazard initial experience.
It also calls for better data and analytics on the front end to point reps to the right targets. What characteristics help you determine that the account could be a good fit?
You can start to use non quantitative metrics to size up your chance at winning. It also makes your reps happier and more successful because they are dealing with accounts that have a better chance of closing.
When I worked in the automotive tech sector, we knew the shop was a great use of our time if it:
Had a website where you could book an appointment online
Was located near a shopping plaza or movie theatre, and
Had more than two bays to fix cars
So net net, having a known TAM is not a bad thing. But it can be if you don’t nurture it and approach it thoughtfully.
Leveraged Moves
Recent C-suite shifts across the private equity landscape… because people moves are performance levers too.
Vialytics named Dr. Oliver Kunath, previously of sevdesk, as CFO. Kunath brings many years of scaling experience and a strong entrepreneurial mindset to the table. Vialytics offers an AI-powered road management system that helps municipalities assess conditions, plan maintenance and automate administrative tasks to improve efficiency and legal protection. It secured a $10M Series A investment led by VC capital investor Scania Growth Capital in 2023.
Tailored Brands, parent company of menswear retailers Men’s Warehouse and Jos. A. Banks, names Mike Baughn as CFO. Baughn most recently was EVP and CFO of Foot Locker, where he led the org’s global financial activities. He previously worked as EVP of Finance and Corporate Treasurer of Kohl’s. Tailored Brands is backed by a group of investors and lenders, which includes existing shareholders who participated in a $75 million investment in March 2021. It also has a $550 million term loan facility, which it used to partially fund a $750 million cash tender offer in April 2024.
Cor van den Berg is named chief financial officer of dried fruits processor Sunsweet Growers. Previously serving as CFO of Darigold, a dairy cooperative, and City of Hope, a cancer research center and treatment org, he brings a global business background working in industries that serve people and cares about health and well-being. Sunsweet Growers is a grower-owned cooperative backed by a network of more than 180 individual farms in California.
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