Definition and how to compute TAM SAM SOM

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B I U
TAM SAM
SOM

3. TAM (TOTAL ADDRESSABLE MARKET)
Total addressable market or TAM refers to
the total market demand for a product or
service. It’s the maximum amount of revenue a
business can possibly generate by selling
their product or service in a specific market.
Total addressable market is most useful for
businesses to objectively estimate a specific
market’s potential for growth.

4. SAM (SERVICEABLE ADDRESSABLE MARKET)
Due to the limitations of your business
model (such as specialization or geographic
limitations), you will not likely be able to
service your total addressable market.
Serviceable addressable market is most
useful for businesses to objectively estimate
the portion of the market they can acquire to
determine their targets.

5. SOM (SERVICEABLE OBTAINABLE MARKET)
Unless you're a monopoly, you most likely can’t
capture 100% of your serviceable addressable market. Even
if you only have one competitor, it would still be
extremely difficult to convince an entire market to only
buy your product or service. That’s why it’s crucial to
measure your serviceable obtainable market to determine
how many customers would realistically benefit from
buying your product or service.
Serviceable Obtainable market is most useful for
businesses to determine short-term growth targets.

7. The best way to calculate total
addressable market is by running a
bottom-up analysis of an industry. A
bottom-up analysis involves counting
the total number of customers in a
market and multiplying that number by
the average annual revenue of each
customer in this market.

9. To calculate your serviceable
addressable market, count up all the
potential customers that would be a
good fit for your business and
multiply that number by the average
annual revenue of these types of
customer in your market.

11. Divide your revenue from last year by
your industry’s serviceable addressable market
from last year. This percentage is your market
share from last year. Then, multiply your market
share from last year by your industry’s
serviceable addressable market from this year.
Keep in mind that these figures will
largely be estimates to inform your strategy.
The more market research you do and the more
historical data you build up, the more precise
your planning will be.

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