TAM SAM SOM: What Do They Mean & How Do You Calculate Them?

TAM SAM SOM: What Do They Mean & How Do You Calculate Them?

With all the excitement that comes with starting a new company and gauging its industry’s profit potential or forecasting a revenue goal for your business, you must remember to root these figures in reality. To help you avoid these issues, we’ve put together a guide that’ll teach you exactly how to calculate your industry’s total addressable market, serviceable addressable market, and share of market. Read on to start setting realistic revenue goals and entering markets that are worth your time and resources. Total addressable market is most useful for businesses to objectively estimate a specific market’s potential for growth. SAM (Serviceable Addressable Market) Unless you're a monopoly, you most likely can’t capture the total addressable market for your product or service. That’s why it’s crucial to measure your serviceable available market to determine how many companies would realistically benefit from buying your product or service. 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. Share of market is the size of your actual customer base or the realistic percentage of your serviceable addressable market that you can capture. To calculate share of market, divide your revenue from last year by your industry’s serviceable addressable market from last year. Then, multiply your market share from last year by your industry’s serviceable addressable market from this year.

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With all the excitement that comes with starting a new company and gauging its industry’s profit potential or forecasting a revenue goal for your business, you must remember to root these figures in reality.

If you don’t, you could enter a market that doesn’t have a large enough market size to convince investors to back you, or you could set an unrealistic revenue goal for your business and burn your employees out.

To help you avoid these issues, we’ve put together a guide that’ll teach you exactly how to calculate your industry’s total addressable market, serviceable addressable market, and share of market. Read on to start setting realistic revenue goals and entering markets that are worth your time and resources.

TAM SAM SOM Template

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.

According to…

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