Welcome to another publication of the Product in Public newsletter!
Giving you an inside look at how I help companies go from ideation → validation → launch → scale.
Before we get to today's newsletter, here’s some of the content I’m consuming that you might find interesting.
What I’m listening to
- What I’m listening to - The Lex Fridman Podcast and his interview with John Mearsheimer regarding geo-political events such as Israel-Palestine, Russia-Ukraine.
Now, on to today’s post.
Micro markets > TAM
Most founders think about large markets when they are launching a product. You see this in their investor decks, where its common practice to show the TAM (Total Addressable Market).
I understand why they do that. Investors like to see large markets because that equates to a larger opportunity and therefore a larger potential return.
The challenge is that it is nearly impossible to build a product feature set that will satisfy the entire market out-of-the-gate.
That is why I encourage founders to think in terms of micro markets.
The size of the micro market will vary depending on multiple factors, including whether or not your model is B2B, B2C, etc.
When you are building enterprise level products, like my team does, I like to think in terms of feature sets that will unlock 25-100 customers at a time.
For consumer-based products you should think about adding a zero, or two, to those numbers.
Other benefits of micro markets
The benefits to serving micro markets go beyond reducing feature scope creep. They also reach into other aspect of a business model. Such as:
- Smaller feature sets mean that you are rolling out smaller amounts of code. So, if you have to roll back code its less disruptive.
- The folks that support live customers don’t have as much to learn.
- Sales teams can focus on the features that really add value to the sales cycle.
These benefits compound f you are a solo founder or part of a small team.
Micro markets in non-software companies
Everything that I have said so far applies to companies who’s model is not software based.
They apply to service-based business and virtually every other model.
Focusing on micro markets allows the founders to become experts at serving those markets.
By, the way, you don’t have to own your own business to benefit from focusing on micro markets.
I saw this benefit when I was a commercial lender at a super-regional bank.
Although I sort of fell into the market, at one point I was the go to commercial banker for dentists in my home town. I eventually knew so much about the industry that I was able to add value, beyond pure capital, to the owners. They came to me for all kinds of financial advice.
Is there such a thing as too micro of a market?
It’s true that it is just as much effort to build a large company as it is to build anything that isn’t a lifestyle business.
But, that’s a long-term strategy.
Think about reaching your growth goals in a phased approach, layering various micro markets, that are similar but distinct.
If you’ve found this information helpful, I hope you’ll do two things for me.
1) Subscribe to this newsletter. That way, new copies are delivered directly to your inbox.
2) Share this newsletter with one other person that you think might benefit from the information I share.