Final answer:
To advise Sam, estimate your app company's TAM, SAM, and SOM by analyzing potential users, targeted market segments, and obtainable market share. Then weigh the potential revenue against costs, considering market competitiveness and scalability. Offer practical advice based on whether the opportunity appears lucrative and achievable with manageable risks.
Step-by-step explanation:
To calculate the market size using a bottom-up approach for your Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM), you must first gather data on the unit sales and pricing models within the specific niche your app company targets. Start by estimating the total number of potential users or customers (TAM), which represents the maximum market potential. Next, identify the segment of TAM that is realistically reachable (SAM), which might be limited by geographical area, regulatory factors, or product specificity. Lastly, calculate the SOM, which is the portion of SAM that you can capture in the short-to-medium term given current limitations such as competition and market readiness.
For providing suggestions to your friend Sam based on costs and benefits analysis, you should consider the potential revenue, cost of customer acquisition, scalability of the product, and competitive landscape. Additionally, you should take into account the required investment as well as the timeframe for reaching profitability.
After analyzing these aspects, if the benefits outweigh the costs and the market size is lucrative enough, your advice to Sam could be positive towards pursuing the app company. But if your analysis suggests a high risk with low potential returns, you should advise caution or reconsidering the venture.