Hi all,

I’m interning at a startup and I’ve been asked to come up with a realistic value for the market size of the BPO industry.

This is why my initial thought process has been:

  • Market size = No. of enterprises x No. of minutes of service availed per enterprise x Rate per minute
  • I intend on segmenting the number of enterprises across key industries (banking, insurance, healthcare etc.), then finding out what the BPO services are in each industry and approximately how many minutes would an enterprise avail on that service.
  • This would give me the minutes per service across different services in different industries.
  • I would multiply this by the rate per minute a BPO offers and arrive at the market size.

Does this seem like a realistic approach? This is how I would ideally do it in a case interview lol but I’m wondering if it makes sense in a real sense. Also not sure how I would arrive at the data for each of this.

Looking for any sort of help on how I could go about this, thanks!

  • GratefullyFriendly73BEnglish
    1·
    11 months ago

    Your idea is a great starting point but I feel it misses the mark a bit. I’ve been using the TAM/SAM/SOM framework for many years now, and it’s not 100% accurate but it gives the most realistic estimation in my opinion.
    * TAM is the full pie - the max revenue you could make if 100% of buyers got your product. Big picture stuff.
    * SAM narrows it down to the slice you can realistically serve. Your geographic reach, target industries, ideal clients.
    * SOM is your slice of the SAM pie. What you can actually obtain after considering competitors.
    For your startup, you’d start by estimating the total demand for outsourcing services in your market/ industry.
    Then refine to target industries you can serve, the specific services they’ll use, and realistic usage estimates.
    Finally, calculate your attainable SOM based on the formula you described.
    You can find a lot of information from industry reports, surveying potential clients, and competitors public financial reports. Let me know if any part needs clarifying. Market modeling done right is complex, but this framework makes it more bite-sized. 😊