TAM is the whole market ($1,200,000,000). SAM is the slice you can actually serve ($180,000,000). SOM is what you can realistically win ($14,400,000), about 1.2% of TAM. Investors look hardest at that SOM: a grounded, obtainable number beats a giant TAM you cannot capture.
Each bar sits inside the one above it. TAM is the full width; SAM and SOM scale to their share of it.
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TAM, SAM and SOM are three nested estimates of how big your market is. TAM is the total addressable market, the revenue you would earn if every possible customer bought from you. SAM is the serviceable addressable market, the share you can actually reach. SOM is the serviceable obtainable market, the part you can realistically win in the near term. The calculator above turns four inputs into all three figures plus the all-important SOM-to-TAM ratio.
Think of three circles, one inside the next. TAM is the outer circle: the entire market for your product across the whole world, regardless of whether you could ever serve all of it. If there are one million potential buyers worth $1,200 a year each, your TAM is $1.2 billion.
SAM is the middle circle: the part of TAM you can serve given your product, your geography, your language and your channels. A US-only tool with English-only support cannot address buyers it cannot legally or practically reach, so SAM is always smaller than TAM. SOM is the inner circle: the share of SAM you can actually capture in the next year or two, given your team size, budget, brand and the competitors already fighting for the same customers. TAM is the dream, SAM is the opportunity, SOM is the plan you can defend in a board meeting.
There are two ways to size a market, and you should run both. Top-down starts from an industry total and narrows it with percentages. You take a published market figure, estimate the slice you can serve to get SAM, then estimate the slice you can win to get SOM. It is quick, which is exactly why it is easy to inflate.
Bottom-up builds from your own numbers upward. Count realistic target accounts, multiply by your actual price, then scale by how many you can win with your current sales capacity. Worked example: 1,000,000 potential customers at $1,200 a year gives a TAM of $1.2 billion. If you can realistically serve 15% of them, your SAM is $180 million. If you can capture 8% of that SAM against competitors, your SOM is $14.4 million, roughly 1.2% of TAM. That is a number you can stand behind, because it came from your own pricing and capacity rather than a wish.
The most common error is an overstated TAM. Founders quote the biggest industry number they can find ("the global X market is $400 billion") and imply they can grab a chunk of it, when most of that market is not addressable by their product at all. A huge TAM with no serviceable logic behind it tells an investor you have not done the work.
The second mistake is skipping the bottom-up check. If your top-down SOM says you will win $14 million next year but your sales team can only close 200 deals at a $5,000 contract value, the two numbers do not agree, and the bottom-up figure is the honest one. Always reconcile the two. A third trap is treating SOM as a fixed ceiling rather than a starting beachhead. A small, credible SOM with a clear plan to expand into the rest of SAM is far more fundable than a giant number you cannot justify.
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