What are your *TAM*, *SAM*, and *SOM*?

Understanding your market size is critical for any startup. This guide will explain TAM (Total Addressable Market), SAM (Serviceable Available Market), and SOM (Serviceable Obtainable Market) – what they mean, how to calculate them step by step, and how to use these metrics both in investor pitch decks and for internal strategy.

What Are TAM, SAM, and SOM?

Total Addressable Market (TAM) defines the total revenue potential for a product or service if one could achieve 100% market share. Essentially, it indicates the yearly sales volume for the entire market, assuming every possible customer purchased your product. TAM is usually represented either as the annual revenue of the market or as the total number of customers for the broadest relevant market for your offering. It assumes no competition and limitless reach – an unrealistic situation, but a useful mental exercise.

Serviceable Available Market (SAM) – a realistic subset of TAM. SAM is the portion of the total market that your business can actually target or serve, given your product/service characteristics and limitations. It factors in constraints like geography, regulatory limits, distribution channels, or product specialization that make only a slice of the TAM truly accessible to you. Essentially, SAM is the segment of the market that fits your product/service and business model, often defined by specific customer demographics, regions, or use cases.

Serviceable Obtainable Market (SOM) – the attainable share of the market. SOM is how much of the SAM you can realistically capture in the near term, especially given your current resources and competition. This is often your target market share in the first few years of operation. For an existing business, SOM can be measured by your current annual sales (revenue) as a fraction of the SAM. For a new startup, SOM is typically an estimated achievable portion of SAM (e.g. the sales you project to reach in 3-5 years). SOM is by nature smaller than SAM, reflecting practical limits like competitor presence and finite marketing/sales capacity.

Why TAM/SAM/SOM Matter?

Investor Appeal: VCs look for startups targeting large markets. A sizable TAM suggests big growth potential. If TAM is too small, the startup’s ceiling is limited, which can deter investment. On the other hand, an extremely high TAM can signal a crowded space. Demonstrating a substantial but credible TAM can make your venture more attractive to investors, and indeed a large TAM can help justify higher valuation assumptions.

Strategic Planning & Focus: Market sizing forces founders to clearly define who their customers are and which segments to prioritize. TAM provides the broad context, but SAM and SOM help you focus on a specific beachhead market. Understanding your SAM ensures you concentrate resources on the part of the market you can actually reach now, rather than diluting efforts. It informs go-to-market strategy and product dev realistic sales goals (since SOM is essentially a near-term sales target based on market share). In short, TAM/SAM/SOM analysis guides where to allocate resources and which segments to target first.

Competitive Insight: Breaking the market into TAM, SAM, SOM naturally leads you to study competitors and market saturation. For example, if your SOM (target share) is, say, 5% of SAM, you’ll need to consider which competitor’s share you are capturing or how you’ll grow the market. This analysis, especially for SOM, can surface insights about competitor size, customer needs, or underserved niches.

Long-term Vision: Discussing TAM versus SAM can help articulate your future expansion plans. Perhaps your current SAM is a narrow segment, but TAM shows a much larger opportunity if you expand product features or go to new markets. Founders should have a vision for how to expand their SAM toward the TAM over time (e.g. new customer segments, international markets, or product lines).

Food for thought: TAM/SAM/SOM numbers are not static.

Initial TAM estimates may appear low, but they can increase as the product generates new demand or discovers additional use-cases. For instance, many tech giants began as startups with modest early TAM—take Facebook, for example, when the market for online social networks was still untested. As these companies evolved, the scope of their TAM grew significantly. Use TAM/SAM/SOM to guide planning, but be sure to revisit them over time.

Calculating Total Addressable Market (TAM)

Before diving into calculations, it’s important to understand the two primary approaches to estimate market size:

Top-Down Approach: start with broad industry figures and narrow them to your market. You typically begin with macro-level data – for example, a published total market size from an industry research report – and then apply filters or assumptions to arrive at the portion relevant to your business. Top-down often relies on third-party sources like industry analysts or consulting firms. For instance, you might take a report saying “the global fitness industry is $250 billion” and then estimate your niche as 5% of that, yielding a $12.5B TAM. The advantage is speed and ease – data from firms like Forrester, IDC or Gartner can give you a quick read on market size. However, top-down estimates can be less precise for your specific business. The available data might not segment the market exactly how you need (e.g. your product might cater to only a certain demographic or usage that the broad figure includes more of). Investors may also view a purely top-down TAM as too superficial if it appears you just “googled a number”. In short, top-down is useful for initial broad sizing and a sanity check, but it should be refined to reflect your target segment.

Bottom-Up Approach: build the market size from the ground up by aggregating micro-level data – essentially counting potential customers and multiplying by how much each would spend. Bottom-up analysis often requires more research, but it yields a customized estimate for your business. You might determine how many customers fit your target profile (using sources like customer surveys, census data, or industry databases) and then multiply by an expected annual revenue per customer. For example, if you’re selling a SaaS product to hospitals, you could find the number of hospitals in your target region and multiply it by your annual price per hospital. If there are 1,352 hospitals in your country and you plan to charge $1,000 per year per hospital, the TAM would be $1.352 million. Bottom-up is typically seen as more credible and accurate because it forces you to identify real drivers of revenue (customer count, pricing, penetration rates) rather than depending on generic market figures. Investors generally prefer bottom-up estimates since they demonstrate you have a concrete grasp of your customer base. The challenge is that bottom-up can be time-consuming and requires access to reliable data about customer numbers and behavior.

Food for thought: Value-Theory Approach
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Suppose you’re creating a product in an entirely new category or significantly improving an existing one. In that case, you might estimate TAM by how much value (or cost savings, etc.) it provides to customers. Essentially, you gauge how much customers would be willing to pay for the benefit you offer, and multiply that by the number of potential customers. This can help when historical pricing data is not available. For example, if your innovation saves businesses $20,000 each per year in expenses, and ~50,000 businesses could use it, you’d argue TAM is $20,000 × 50,000 = $1 billion based on delivered value. Value-based TAM is more speculative, but useful to justify markets for truly novel products.

Which approach to use? Use both if possible. A top-down estimate shows if the space is interesting. Ensure numbers make sense in both directions—your bottom-up TAM shouldn’t contradict industry figures (if it does, double-check assumptions). When pitching, use bottom-up numbers but reference top-down as a cross-check or broader context (e.g. “We’re initially targeting a $500M segment of a $10B industry”).

Calculating Serviceable Available Market (SAM)

Once you have TAM, you need to narrow it down to the portion you can actually reach or serve – that’s your SAM. Think of SAM as TAM, filtered by your business model’s limits and focus.

Step 1: Filter Your TAM

Narrow down your TAM by removing segments you can't or won't serve:

• Geography: Only count regions where you can actually sell
• Customer Type: Only include customers your product is designed for
• Product Limitations: Remove use cases your product can't handle
• Practical Constraints: Exclude segments you can't reach due to regulations, distribution challenges, etc.

Essentially, systematically go through the TAM and ask: “Which of these potential customers can we realistically get or serve given our current focus and resources?”

Step 2: Calculate the Size

Once you've identified your target segment, calculate its value:

• Option A: Multiply your TAM by the percentage that fits your filters
• Option B: Count your specific target customers and multiply by your expected revenue per customer (you might use different sources for this narrower search, such as national statistics instead of global, specific industry sub-segments, etc.).

Remember: SAM is by definition ≤ TAM.

If your SAM is almost as large as your TAM, it means you are initially targeting nearly the whole market. If your SAM is a small fraction of TAM, it indicates a very focused beachhead (which can be a good thing – a well-defined initial market).

Example 1: FinTech Payment Solution for E-commerce

TAM Calculation:

• European e-commerce transaction volume: €800 billion annually
• Standard payment processing fee: 1.5%
• TAM: €800 billion × 1.5% = €12 billion in annual processor revenue

SAM Filters:

• Focus on SME e-commerce merchants (30% of transaction volume): €240 billion
• Initially serving SEPA countries only (90% of European e-commerce): €216 billion
• Targeting only merchants processing €100K-€10M annually (40% of SME volume): €86.4 billion

SAM Calculation:

• Serviceable transaction volume: €86.4 billion
• Your processing fee: 1.2% (competitive rate)
• SAM: €86.4 billion × 1.2% = €1.04 billion annually

Example 2: B2B Cybersecurity Software

TAM Calculation:

• European enterprise cybersecurity market: €35 billion annually
• Segment for endpoint security solutions: 20% = €7 billion

SAM Filters:

• Focus on mid-market companies (50-1000 employees): 40% of the market = €2.8 billion
• Only EU countries with GDPR enforcement priorities: 85% of mid-market = €2.38 billion
• Specific industries with highest compliance needs (finance, healthcare, government): 60% of filtered market = €1.43 billion

SAM Calculation:

• Target market size: €1.43 billion
• Realistic market share given competition and solution scope: 10%
• SAM: €143 million annually

Calculating Serviceable Obtainable Market (SOM)

SOM takes it one step further – of the market you can target (SAM), how much will you likely win? You won’t capture 100% of your SAM, at least not immediately. SOM is essentially your market share projection. Calculating SOM involves understanding competition and your own go-to-market capabilities:

Step 1: Define your timeframe and context

SOM is often discussed as what you can capture in the short-to-mid term, such as the next 3-5 years, or at a certain stage of the company (e.g., by the time you scale up operations). Be clear if you’re talking about an initial one-year goal or a five-year goal.

Step 2: Estimate your market share

Determine what percentage of the SAM you can realistically capture based on:

• Competition Analysis: more competitors = smaller likely share
• Your Competitive Advantage: strong differentiators may help you capture more
• Operational Capacity: what you can actually deliver, regardless of demand (e.g. if your SAM is 10 million users, but you only have the infrastructure serve 1 million in the first year, your SOM can’t exceed that operational cap initially).

Be realistic – claiming you will get 50% of the market in 2 years will be met with skepticism in most cases.

Step 3: Calculate SOM in Revenue

Simply multiply: SOM = SAM × Your Expected Market Share Percentage

Remember: SOM should always be ≤ SAM.

Example 1: FinTech Payment App in EU

• SAM: €1.04 billion (from the example above)
• Current position: First-mover advantage in specific niche
• Capacity constraints: Infrastructure can handle 12% of market
• Realistic share: 8% within 4 years
• SOM: €1.04B × 8% = €83.2 million

Food for thought: if your startup is already in market, calculating SOM is more straightforward -it’s your current revenue relative to the market size.

Data Sources for Market Sizing (TAM/SAM)

Finding good data is essential for accurate TAM and SAM calculations. While some resources work for both US and EU markets, each region has its own best sources.

Use a mix of sources. Often, you’ll start with a top-down number from an analyst report for a quick sense, then validate and adjust it with bottom-up data from census or industry sources. Triangulating from multiple reputable sources makes your TAM/SAM estimates much more convincing . And always cite the sources in your notes or pitch – it shows you did your homework and lends credibility - in a pitch deck, you might put a tiny source note on the slide for the data or be ready to provide the backup in Q&A.

Government Sources

Government databases are among the most reliable and often free resources. They frequently provide consumer demographic data—such as the number of households and income levels—which can assist in the B2C TAM. Similarly, national census data often includes information on the number of companies within a given industry, broken down by size, making it ideal for a B2B bottom-up TAM.

1. EU Markets:
   • Eurostat - Comprehensive EU-wide statistics on businesses, demographics, and economic indicators
   • National Statistical Offices - Such as GUS (Poland), Destatis (Germany), INSEE (France)
   • European Commission Reports - Industry analyses and market studies
   • European Investment Bank - Market research and economic analyses
2. US Markets:
   • US Census Bureau - Business counts, demographics, Economic Census
   • Bureau of Labor Statistics - Occupation data, industry employment
   • Securities and Exchange Commission (SEC) - Public company filings
   • Small Business Administration - SMB market data

Industry Research

1. EU-Focused:
   • European industry associations - e.g., DIGITALEUROPE, European Banking Federation
   • OECD European Data - Economic indicators for European countries
   • EU-funded research programs - Horizon Europe, European Innovation Council reports
2. US-Focused:
   • IBISWorld US - US industry reports and market analyses
   • US trade associations - Industry-specific data for American markets
   • Conference Board - US economic analyses and forecasts
   • US Chamber of Commerce - Business trends and market insights

‍Global Resources

• Gartner, IDC, Forrester - Tech market sizing (with regional breakdowns)
• McKinsey, BCG, Bain, Deloitte - industry reports often segmented
• PitchBook, Crunchbase, Dealroom - Investment data, can be filtered by region‍

Company and investor databases such as PitchBook, Crunchbase, and Dealroom are especially relevant if you want to research your competitors in the tech space. They can tell you how many companies exist in a certain category or how much funding similar companies have (indirectly reflecting market interest).

Presenting TAM/SAM/SOM in Investor Materials

When it comes to pitching investors, how you present your market size can greatly influence their first impression of your startup’s potential. Here are some guidelines for crafting a clear and impactful TAM/SAM/SOM section (often a single slide in a pitch deck):

• Show the Three Numbers Clearly: Investors expect to see the relationship TAM > SAM > SOM. Make it easy to read at a glance. Many use a concentric circle diagram or layered funnel to visualize the three levels . For example, you might have three nested circles labeled with your TAM, SAM, SOM values (and a one-line descriptor each).
• Use Bottom-Up Data (and Label Units): As discussed, a bottom-up derived number is more credible – so if you computed TAM via bottom-up, highlight that logic in a subtitle (e.g., “TAM = 125M users × $100/year = $12.5B”). If you used a top-down source, you can state the source (e.g., “TAM (Global market) from Gartner: $20B”). Be sure to specify whether the figure is annual revenue or something else. Typically use annual revenue to keep consistency. And avoid mixing up dollars and customers without clarification.
• Don’t Overinflate or Overgeneralize: It’s tempting to present the biggest number possible for TAM, but savvy investors will question an unrealistically large or irrelevant TAM. Make sure your TAM reflects your core target market, not “anyone with a wallet.” For example, if you have a product for Gen Z consumers, don’t cite the population of the entire world or all millennials+GenZ as TAM. Keep it believable. A TAM that’s slightly smaller but clearly relevant is far better than one that’s huge but abstract.
• Highlight Key Assumptions (briefly): If your TAM or SAM involves an assumed adoption rate or price, you might note that in fine print. For example: “Assumes $100/year per user, 100% adoption in target group.” You don’t need to show the full math on the slide (and definitely not a complex spreadsheet), but one or two assumptions in small text or spoken aloud will preempt questions. Also be prepared to defend your numbers. If you say TAM = 50,000 SMBs × $20k = $1B, an investor may ask “where did you get 50,000 SMBs from?” – be ready to cite the source or reasoning .
• Show Your Focus (SAM) and Traction Goals (SOM): Sometimes founders only show TAM, but including SAM and SOM is important to demonstrate a strategy. SAM shows you have picked a beachhead (e.g., “we’re initially targeting the German market of €500 million (SAM) out of € 2B TAM”). SOM shows you have a realistic grasp of achievable scale (“we aim to get €50M of that in 5 years, i.e. 10% SOM”). This progression tells a story: big opportunity, focused entry point, achievable near-term win. It can also spark discussion on how you’ll get that SOM – which is your go-to-market plan. Make sure your SOM ambition aligns with what you later describe in the go-to-market or financial slides.
• Use Comparisons if Helpful: In some cases, you might bolster your SOM by comparing to analogous companies or precedents. For example, “Our 5% SOM in five years is in line with how Company X captured 5% of the market within 3 years of launch” (if you have that data). Or “The market is fragmented; the top player only has ~10% share, so our goal of 5% is attainable.” These can reassure investors that your share targets aren’t coming out of thin air.
• Keep the Visual Simple: The TAM slide should be quickly understandable. It’s often one of the first slides after you describe the problem/solution, meaning the audience is orienting to the scale of the opportunity. Use large fonts for the numbers, a clean graphic, and minimal text. Color-code or arrange TAM, SAM, SOM in a logical way. Avoid cramming other info on this slide. You want them to remember your market is big and your plan is focused.

As an example of good presentation: Early in Facebook’s history, their pitch deck didn’t claim “everyone on the planet” as TAM; instead, they highlighted the number of college students in the US – the segment they could serve then – which was a compelling case on its own. Investors bought into that focused vision of capturing colleges first, precisely because it was concrete. You can always expand your claims later, but credibility is built by being realistic at the start.

Using TAM/SAM/SOM for Internal Planning and Strategy

Beyond fundraising, TAM, SAM, and SOM are valuable tools for your own strategic planning and go-to-market decisions:

• Choosing Your Initial Market (Focus): Estimating SAM helps you decide which segment to target first. Startups often have to choose a “beachhead” market – a subset of customers who are most likely to adopt your product early. By quantifying different potential SAMs, you can compare and prioritize. For example, your TAM might include two or three segments (say, two different industries or user groups). Calculating SAM for each (e.g., TAM = €1B, but Segment A SAM = €200M vs Segment B SAM = €50M) might reveal that Segment A is larger and worth focusing on first – or perhaps Segment B is smaller but has less competition, thus easier to capture. The process ensures your go-to-market focus is data-driven rather than based on hunches.
• Product Development Roadmap: Knowing the size of various opportunities can inform your product roadmap. If your TAM is composed of multiple segments that you can’t tackle all at once, you might plan features or versions of your product to progressively unlock those segments.
• Setting Sales Targets and KPIs: SOM is essentially your sales goal in market share terms. Internally, you might translate that to customer acquisition targets. If SOM for year 3 is, say, 5% of SAM, and you know SAM corresponds to 100,000 customers, then your goal is 5,000 customers. This can be broken down into annual or quarterly targets. It also helps in capacity planning – e.g., do we have enough salespeople to reach 5,000 customers? SOM can thus align your team on what “success” looks like in terms of penetration. As you execute, you can track your actual SOM (market share) vs. plan: Are you capturing the percentage of the market you aimed for? If not, why – is the SAM different than expected, or is our conversion lower?
• Resource Allocation: Understanding the size of each market segment (SAM) can guide where to invest marketing and expansion efforts. If one segment of customers is significantly larger or more lucrative, you might allocate more budget or personnel to that segment. Conversely, if you’ve saturated a segment (approaching a high SOM), you might shift resources to another segment or broaden to a new SAM to continue growing. TAM/SAM analysis thus prevents wasting resources on markets that are too small or overly competitive, by making the opportunity cost clear.

In summary, TAM, SAM, SOM are not just buzzwords for a slide – they are planning tools. They force you to quantify your assumptions about the market. They help avoid the trap of either thinking too small (getting stuck in a tiny market) or too big and unfocused (trying to boil the ocean). By clearly delineating these levels, you can make smarter decisions about where to play and how to win over time.

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