TAM is your growth roadmap

TLDR:

• TAM (Total Addressable Market) is the maximum potential revenue your product could generate if every possible customer bought it.

• SAM (Serviceable Addressable Market) is the portion of the market you can realistically serve right now, based on factors like geography, product readiness, or regulations.

• SOM (Serviceable Obtainable Market) is the slice of the market you can actually win today, given your team size, budget, and competition.

• Clarity: Understanding TAM, SAM, and SOM helps founders bring clarity to where they should start, where to focus their resources, and how to set realistic growth targets.

• Guide Investments: TAM is a strategic tool to assess opportunities, guide product and marketing decisions, and show investors that your business has room to scale.

What is Total Addressable Market (TAM)?

TAM stands for Total Addressable Market. It is the big number that shows how much revenue you could make if every single potential customer bought your product or service. It’s typically expressed in two ways:

• As the total number of potential customers

• Or as the total potential revenue from those customers

Think of it like this:

👉 If your product was a subscription tool for small marketing agencies, your TAM would be the total number of those agencies globally multiplied by your annual price.

It’s not about what you’ll earn today. It’s about understanding the maximum size of the opportunity if everything goes your way. Giving founders a clear picture of the full market potential for what you're offering, whether you're entering a new space or expanding an existing one.

One more thing... or two.

When thinking about your Total Addressable Market (TAM), it’s important to also consider two more grounded layers: your Serviceable Addressable Market (SAM) and your Serviceable Obtainable Market (SOM). While TAM shows the full potential of your market if you capture 100% of it, SAM narrows this down to the customers you can actually serve today, and SOM zooms in further to what’s realistically achievable given your current resources and competition.

Salesforce has a great explanation of the difference between TAM, SAM and SOM with an in-depth example to illustrate.

For founders, understanding all three helps balance ambition with focus giving you a clearer picture of where to start, how to grow, and what success could look like at each stage.

TAM, SAM, SOM fully explained?

TAM: Total Addressable Market

This is the dream. It’s the entire market demand for your product or service, assuming every single person who could buy it, does.

TAM Example

Say you’ve built a project management tool for digital agencies. There are roughly 1 million agencies worldwide that could use it, and you charge £1,000/year. That makes your TAM = £1 billion/year. But unless you're planning world domination right now, that number isn’t your immediate goal.

SAM: Serviceable Addressable Market

This is the market you could actually serve right now, based on your current capabilities things like geography, language, regulations, or product fit.

SAM Example

You're focusing only on the UK and Ireland for now. That narrows your target to 100,000 agencies, making your SAM = £100 million/year. This is the slice of the market you can reach with your current setup.

SOM: Serviceable Obtainable Market

This is your actual target. The bit of the market you can realistically win given your resources, competition, team size, and marketing reach.

SOM Example

Your competitor has a strong grip on the top 50% of the market, and your sales team can only handle 500 new accounts a year. So in the near term, your SOM = 500 agencies × £1,000 = £500,000/year. That’s your realistic starting point.

Interested in calculating your TAM? Cognism created this near TAM Calculator which offers enough functionality to work out the size and makeup of your total addressable market.

Why TAM, SAM, and SOM Matter?

It helps you make smarter decisions and keeps you from wasting time on markets that are too small (or too scattered) to grow in. Knowing your TAM helps you:

• See the big picture. Are you in a niche or a high-growth space?

• Prioritise where to go next. What customer segments have the most upside?

• Tell a compelling story. Investors, partners, and team members want to know there’s real potential behind your product.

• Measure progress. It gives you a benchmark — are you just scratching the surface or close to saturation?

However, too many founders only talk about TAM and while big numbers are exciting, SAM and SOM help you make smarter plans:

• Where should we focus first?

• What growth targets are actually achievable?

• When is it time to raise investment or expand?

Knowing all three helps you keep one eye on the big picture while staying grounded in what’s possible today.

Let’s say your B2B SaaS tool has 150 paying customers, and you estimate there are 10,000 similar businesses in your core markets. That means you’ve only tapped 1.5% of your TAM. This is a data-driven way to tell your sales and marketing team there is massive room to grow!

For an in depth analysis I would recommend reading Toptal's analysis of WeWork's TAM, SAM, and SOM. Which goes from definition to SOM in a few easy steps.

What should I do next?

Once you understand your TAM, SAM, and SOM, the next step is to make it actionable.

Start by building a list of target accounts that match your ideal customer profile (ICP).

Talk to your sales and customer success teams to get clarity on what a "great" customer really looks like, then validate it with data, especially by reviewing your won and lost deals from the past 18 months.

Look for patterns in key factors like industry, company size, geography, and expected ARR per 100 opportunities (calculated as win rate × average ACV × net revenue retention × 100).

Go even deeper by layering in signals like the technology they use, hiring trends, or other indicators of buying intent.

This turns your market sizing from theory into a focused, data-driven strategy you can actually use to grow.

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If you would like to understand more about how to build your TAM, SAM and SOM, or would like to talk to someone about it? Send me a message on WhatsApp or Schedule A Strategy Call.