How does an Investment Banker Determine the Total Addressable Market (TAM)

This document applies this methodology for the TAM for analytics for each GIC sub-industry:

1. Data Collection: Gather data from reliable sources, such as market research firms, industry reports, government statistics, and company financial reports. In the process, we ensure that the data covers all the GICS sub-industries.
2. GICS Sub-Industry Segmentation: Categorize the collected data according to the GICS hierarchy, which includes 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries. Focus on the sub-industry level for this exercise.
3. Define Analytical Metrics: Choose key performance indicators (KPIs) to measure the TAM for analytics within each sub-industry. Some examples of KPIs include:

• Revenue generated from analytics products/services.
• Number of analytics users or customers.
• Market share of analytics products/services within the sub-industry.

1. Establish a Time Frame: Set a time frame for your analysis, such as 5 or 10 years. This will help you evaluate trends and growth patterns over time and make projections for future market size.
2. Market Sizing and Forecasting: Estimate the size of the TAM for analytics in each sub-industry by applying your chosen KPIs. Use historical data to calculate CAGRs (Compound Annual Growth Rates) and make future projections. To account for uncertainties, create multiple scenarios (e.g., best-case, base-case, and worst-case).
3. Market Penetration Analysis: Analyze the current market penetration of analytics products/services within each sub-industry. This will help you identify under-served markets with significant growth potential.
4. Competitive Landscape Analysis: Study the competitive dynamics within each sub-industry, including market leaders, their market shares, and the strategies they employ. Assess the barriers to entry and competitive advantages that new entrants would need to penetrate the market.
5. Identify Growth Drivers and Challenges: Determine the key factors driving growth in analytics adoption within each sub-industry, such as technological advancements, regulatory changes, or increasing demand. Also, identify the challenges that could hinder growth, such as high costs, data privacy concerns, or a lack of skilled professionals.
6. Evaluate Market Attractiveness: Using the insights gathered from the previous steps, rank the sub-industries in terms of market attractiveness for analytics providers. Consider factors such as market size, growth potential, competitive landscape, and barriers to entry.
7. Reporting and Presentation: Consolidate the findings and insights into a clear and concise report, presenting the TAM estimates, growth forecasts, market attractiveness rankings, and other relevant insights for each GICS sub-industry.