We’re working with DrawMaster Pro, a leading technology company that has revolutionized the digital art world with its innovative digital drawing app. A new market opportunity we experimented with is DrawMasterPro for Small Businesses. Small Medium Businesses (SMBs) is an app on DrawMasterPro to create trendy marketing campaigns and materials for a cheaper price.
We will assume a freemium model with one-time purchases (like limited sticker packs), averaging out at $1 per business per year. We also assume that we will charge $5 per month per business for full access to all product offerings, such as all premium sticker packs and advanced reel layouts.
All of our data is from the U.S. Small Business Administration and we will calculate annual SOM, SAM, and TAM.
SOM: Bay Area
We start here because we assume individuals and businesses in the Bay Area are more tech-savvy (for our digital product) and would likely more willingly adopt digital products as a whole.
Our SOM is 20% of Bay Area SMBs. There are in total 4.2M SMBs in CA, and we’ll assume around 10% of CA SMBs are in the Bay Area, equaling 420,000 Bay Area SMBs.
Calculation Logic:
- A% use free version (limited, no customizable features)
- B% use the paid version (full access, $5 per month, $60 per year)
- A = 20%, B = 80%
Calculations:
= All users are worth $1 + paid users
= (420,000 Bay Area SMBs * 0.6 of all Bay Area SMBs * $1 a year) + (420,000 Bay Area SMBs * 0.6 of all Bay Area SMBs* 0.8 of those SMBs who use the paid version * $60 a year)
= $12,348,000 SOM
SAM: West Coast
From California, we expand to the entire west coast.
We estimate we can capture 40% of the west coast, where the west coast in total has 6.21M SMBs.
Calculation Logic:
- F% use free version (limited, no customizable features)
- X% use the paid version (full access, $5 per month, $60 per year)
- F = 40%, X = 60%
Calculations:
= All users are worth $1 + paid users
= (6.214M West Coast SMBs * 0.4 of all West Coast SMBs * $1 per year) + (6.214M West Coast SMBs * 0.4 of all West Coast SMBs * 0.6 of those SMBs who use the paid version * $60 a year)
= $91,967,200 SAM
TAM: America
We estimate 20% market capture of America. There are a total of 33.2M SMBs.
Calculation Logic:
- T% use free version (limited, no customizable features)
- G% use the paid version (full access, $5 per month, $60 per year)
- T = 70%, G = 30%
Calculations:
= All users are worth $1 + paid users
= ($33.2M SMBs * 0.2 of all American SMBs * $1 per year) + (33.2M SMBs * 0.2 of all American SMBs * 0.3 of those SMBs who use the paid version * $60 a year)
= $126,160,000 TAM
In summary, our TAM shows that there is potential in heading deeper into this space.
