Unlock: 5 Questions to Unleash Your Company's Hidden Power

By Matt Hulett

You CAN change your business destiny.
From a veteran technology executive comes an essential toolkit to reveal exactly where your company’s true value lies—and how to reap its rewards.
Over his 30 years as an executive in the technology sector, Matt Hulett has become the go-to company fixer. From RealNetworks to Rosetta Stone to Expedia, he has steered start-ups and large companies into renewed areas for growth and driven more than $2 billion in value creation. Now, he shares five key questions that will uncover new insight into your business’ potential—without the need for a lengthy and costly strategic planning process.
Through real-life examples, personal stories, and insights from thought leaders and CEOs, Hulett guides you through the steps of taking a deep dive into your company’s pivot potential. He shows you how to take stock of your business, from your company’s alignment to market trends and your supply chain position, to your value proposition for customers, to your ability to raise capital.
Along the way, you’ll begin to identify where your true potential lies, and map out a plan to capitalize on it. With expert advice on assessing industry shifts, valuable insights on leading teams, and tips for raising money and pitching investors, Hulett shows you exactly where to look, and what you need to find, in order to map out a new future for you and your company.

• Language: English
• Publisher: Matt Hulett
• Release date: May 16, 2022
• ISBN: 9781774581551

Book preview

One

Alignment to

Market

Growth Trends

---

Insight Question #1

Is your tam

(total addressable market)

large enough?

1

Market

Definition

Is the Market Big and Growing?

There’s a common adage that you need at least a billion-dollar market to make an exciting business. That is not necessarily true for all businesses—it’s totally fine to own and run a small, cash flow–positive company. However, the sentiment is definitely true if you are looking to be a venture capital–based business or any business that has scaled long-term growth prospects. We are talking about a business that has the potential to be or is over $100 million. This is because you need to ensure that you have enough clearance in your market to grow market share and support your long-term growth. If you are looking for capital with investors, they are going to want to ensure the market is large enough to support your valuation so that they can get a reasonable return.

So, to reiterate, a $1-billion-plus addressable market is important because you need a high enough ceiling in a marketplace to operate. If your market is small and crowded, you’re going to have compression. The market may be attractive, but that compression inevitably means that you will have new and existing entrants all competing for your customers, suppliers, leads, etc. For instance, if you are relying on paid installs or paid traffic for customer acquisition, the competition will continually drive up your costs as activity intensifies. I have seen this time and time again, from shopping marketplaces to travel. I once ran a gaming business, and there we saw that having size and scale ensured that our company had better margins and could outprice the competition.

In all these matters, the situation gets worse with a smaller market. Your upside is capped (because it’s small), and the market becomes inefficient over time. It’s a lot easier to operate in a larger market with several different types of serviceable, addressable markets—a subject we will get into in the next chapter.

Big TAM but Where Are You Servicing It?

First of all, you need a big total addressable market or TAM. But you also need a large and growing serviceable market. The SAM—serviceable addressable market—is where your company or products address a set of customers. It’s rare to have a SAM that is as large as your TAM. Identifying an addressable market where you can have some competitive advantage is important, especially if you can find a SAM that is growing faster than the overall market. This is a great opportunity to get an edge in the marketplace. It’s a good place to knock down your first proverbial bowling pin.

Understanding your SAM enables you to focus and get a wedge into the market. It’s a great place to start. There are several ways to look at the market. You can look at how you’re growing against the overall size of the market, which can be unit market share or as a revenue leader. Or you can compare your performance against the TAM and SAM to see how your relative performance is tracking.

I’m always surprised to see entrepreneurs talk about their total addressable market without understanding who they’re targeting within that market. In the B2B space, you are typically targeting via firmographics to slice up your TAM and SAM. In the consumer space, it is typically both demographics and psychographics for determining your target.

In fact, when I worked at IAC (InterActiveCorp, a holding company that is the mastermind of media and e-commerce mogul Barry Diller), we literally just talked to a version of the following diagram. You have to look at the TAM, the SAM, and what percentage of each market you can obtain. Those three numbers mapped over time should give you a strong sense of whether you have found a compelling business proposition with a large enough operating pond.

Total Addressable Market

Service Addressable Market

CAGR: compound annual growth rate

Your Forecasted Growth & Market Share

I really want to stress the importance of starting off your analysis by being very clear on your TAM and your SAM. Use these diagrams to help you. I have included several examples with some colorful stories to better illustrate the point from an operator’s perspective.

Case Study: Mpire—The Empire Was Too Small

Identifying a compelling problem to solve is certainly important. But I can’t stress enough the need to pick a compelling addressable market. A good example of picking the right market and the right problem to solve is a business called Mpire.

Mpire was founded by two friends of mine. I was initially asked to be a board member before I came in as CEO. The company built a very cool ERP (enterprise resource planning) system for eBay buyers. The thought behind the platform was to make it super easy for anyone to build a business. The focus was on eBay, but the idea was to eventually build APIs (application programming interfaces), which are like Lego blocks that allow applications to connect to each other and to other e-commerce platforms. Remember that this is pre-Shopify. Mpire raised money from a Seattle-based venture capital firm called Ignition Partners. Dave Cotter (the founding CEO) had built an awesome vision for the company—what he called the American Dream 2.0. The idea was to enable anyone to build a business, using eBay as the first pre-existing marketplace to do this.

Besides the obvious threat of building a business on top of another business, Mpire had a great product, great investors, and a great team, but the TAM was just too small. To break this down, the eBay seller tools marketplace already had a lot of competition in it. eBay also had their own product. The players that were in it didn’t really build large, successful businesses, which is an obvious red flag. In addition, the competitors selling tools in the space moved up-market, meaning they went after larger eBay buyers.

Think of these buyers as the eBay equivalent of the S&P 500. Mpire was focused on smaller buyers—or, to extend the analogy, the small-cap players in the eBay ecosystem. And overall, eBay didn’t have a strong and thriving ecosystem. The golden rule for successful platform businesses is that the players who build products on top of the platform—not the platform itself—capture the lion’s share of the value. eBay did not have a thriving marketplace strategy for developers—it was capturing the main sources of value in the ecosystem itself. When we analyzed the TAM (the eBay seller tool business) and the SAM (small business eBay), along with the percentage of that SAM that we could reach, we found we had what you could affectionately call market-sizing mice nuts. There simply wasn’t a lot of room to grow the business, let alone build a compelling venture-based business model.

I remember saying in my first board meeting for Mpire that we were selling productivity software to people who don’t value their time. Yikes. Welcome to the board. What to do when you are in a crowded and small addressable market? Well, you pivot. Which is what we did—we pivoted the company to a bigger TAM. Here’s how.

B2B Case Study: Mpire to WidgetBucks to

AdXpose, Oh My! Pivoting to a Bigger TAM.

So, like I said, we pivoted. In fact, we pivoted twice—which I do not recommend because you waste investors’ capital, but we were running out of money. Fast.

As background, Mpire’s relationship with eBay was really strong. We had been one of their favorite third-party developers. We were using their eBay seller data API to pull out some interesting insights. The use case was originally using that data for sellers to automate the process of pricing their listings and knowing how to price them. This was hard because eBay’s data was completely unstructured. We had access to the API and were able to make sense of this unstructured data, better than eBay in some cases. We actually figured out how to build a better eBay search engine than eBay could. We built custom algorithms specifically for eBay’s customer data set. eBay has a leafless structure, meaning you can post any product, such as a shirt, and not necessarily have to map it to the sort of taxonomy you would normally see (like Shirts>Men>Size>Color>Brand). It’s not like Amazon. An eBay seller enters their own listing and can put it in any category. So the ability for a consumer to navigate a crisp taxonomy is difficult, and some consumers couldn’t find certain products because they were misclassified. Mpire figured out a way to make sense of all this noise in the