TAM SAM SOM Calculator
Estimate your Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) to understand your business's market potential.
Market Size Estimates:
Total Addressable Market (TAM):
Serviceable Available Market (SAM):
Serviceable Obtainable Market (SOM):
Understanding TAM, SAM, and SOM
The TAM, SAM, and SOM framework is a crucial tool for market sizing, helping businesses understand the potential revenue opportunities for their products or services. It provides a structured way to assess market attractiveness and define realistic growth targets.
Total Addressable Market (TAM)
The **Total Addressable Market (TAM)** represents the total revenue opportunity if 100% of the market for a product or service were captured. It's the largest possible market size, assuming no competition and unlimited resources. TAM helps in understanding the long-term potential and overall scale of an industry. For example, if you're selling a new type of coffee, your TAM might be the total annual spending on coffee globally.
How it's calculated: Often, TAM is estimated by multiplying the total number of potential customers by the average annual spending per customer on the product or service category.
Serviceable Available Market (SAM)
The **Serviceable Available Market (SAM)** is the portion of the TAM that a company can realistically serve given its current business model, geographical reach, and product capabilities. It's a more focused segment of the market that aligns with your company's specific offerings and operational constraints. Using the coffee example, if your coffee shop only operates in a specific city, your SAM would be the total annual spending on coffee within that city.
How it's calculated: SAM is typically a percentage of the TAM, reflecting the portion of the total market that is accessible to your business.
Serviceable Obtainable Market (SOM)
The **Serviceable Obtainable Market (SOM)**, also known as Share of Market, is the portion of the SAM that a company can realistically capture in the short to medium term. This takes into account factors like competition, sales channels, marketing efforts, and market penetration strategies. It represents your realistic revenue target. For the coffee shop, your SOM would be the amount of coffee sales you realistically expect to capture in your city, considering other coffee shops and your marketing efforts.
How it's calculated: SOM is usually a percentage of the SAM, representing the achievable market share given competitive landscape and strategic execution.
Why are TAM, SAM, and SOM Important?
- Strategic Planning: Helps in setting realistic business goals and growth strategies.
- Investor Relations: Provides investors with a clear understanding of market potential and the company's achievable share.
- Resource Allocation: Guides decisions on where to invest resources for maximum impact.
- Product Development: Informs product roadmaps by highlighting market segments with the highest potential.
Example Scenario: Online Learning Platform
Let's consider an online learning platform specializing in coding courses.
- Total Potential Customers in Market: 500,000 (e.g., total number of individuals globally interested in learning to code annually).
- Average Annual Spending per Customer: $200 (average annual spending on coding courses/resources).
- Percentage of TAM Accessible by Your Business: 15% (platform focuses on specific programming languages, targets English-speaking audience, and has certain geographical restrictions).
- Achievable Market Share within SAM: 10% (considering competition from other platforms, marketing budget, and brand recognition).
Using the calculator with these values:
- TAM: 500,000 * $200 = $100,000,000
- SAM: $100,000,000 * 15% = $15,000,000
- SOM: $15,000,000 * 10% = $1,500,000
This indicates a total market of $100M, an accessible market of $15M, and a realistic short-term revenue target of $1.5M for the online learning platform.