Total addressable market (TAM)
What is total addressable market?
Total addressable market (TAM) is the total annual revenue available for a product if every possible customer bought it. It is usually paired with SAM (serviceable available market, the part you can reach with your product and channels) and SOM (serviceable obtainable market, the share you can realistically win in the near term).
The most credible estimates are built bottom-up: number of potential customers times what each would pay.
Why total addressable market matters
Market size shapes ambition, fundraising and focus. For an early startup, SOM and the beachhead market matter more day to day than a huge TAM.
Total addressable market example
There are 50,000 independent coffee shops in a region (TAM base). 20,000 use the point-of-sale systems you integrate with (SAM). You expect to win 500 in two years at $600 a year (SOM revenue: $300,000).
Related marketing terms
A beachhead market is a small, specific first market a startup aims to dominate before expanding to neighbouring markets.
A go-to-market strategy is the plan for bringing a product to customers: who it is for, how it is positioned, priced, marketed and sold.
An ideal customer profile, ICP, describes the kind of company or person that gets the most value from your product and is best to sell to.