What is TAM (Total Addressable Market)?

TAM (Total Addressable Market) is the total revenue opportunity available if a product achieved 100% market share. It represents the maximum possible demand.

SAM (Serviceable Addressable Market) is the portion of TAM you can realistically reach with your business model, geography, and capabilities.

SOM (Serviceable Obtainable Market) is the portion of SAM you can realistically capture in the near term (1-3 years).

How to calculate:

*Top-down approach:*
Start with industry reports and narrow down:
TAM = Industry size × relevant segment %

*Bottom-up approach (preferred by investors):*
Start with your unit economics and multiply:
TAM = # of potential customers × average annual revenue per customer

Example:
Online project management tools:
•TAM: All businesses worldwide that could use PM software (30M × $600/yr = $18B)
•SAM: English-speaking SMBs in North America (3M × $600/yr = $1.8B)
•SOM: 2% capture in years 1-3 (60K × $600/yr = $36M)

Why it matters: VCs generally look for TAM > $1B. If your TAM is too small, it limits the potential return on their investment.

Use our free TAM/SAM/SOM calculator to calculate your market size instantly →