When starting a business, one of the most important questions is: “How big is my market?” This is where TAM, SAM, and SOM come into play. Understanding these concepts helps you estimate the market opportunity, attract investors, and build an actionable growth strategy.
In this guide, we’ll explain TAM vs SAM vs SOM, how to calculate them, give examples, and show how startups like Airbnb use this framework.
What is TAM SAM SOM?
TAM SAM SOM is a market-sizing framework used to evaluate potential opportunities for a product or service. The terms stand for:
-
TAM (Total Addressable Market)
The total revenue opportunity if you captured 100% of the market. -
SAM (Serviceable Available Market)
The portion of TAM that your product or service can serve. -
SOM (Serviceable Obtainable Market)
The realistic portion of SAM your business can capture in the near term.
Think of it as a funnel:
TAM (biggest) → SAM → SOM (smallest)
This framework helps startups make data-driven decisions and communicate growth potential to investors.
Why TAM SAM SOM Matters
Using TAM SAM SOM is important for:
-
Pitch decks and presentations
Investors expect you to show market size and potential. -
Strategic planning
Helps define your target market and focus on realistic goals. -
Marketing and sales
Aligns campaigns with reachable audience segments. -
Competitive analysis
Shows how your SOM compares to competitors.
How to Calculate TAM SAM SOM
1. Calculate TAM
TAM can be calculated in two ways:
- Top-down approach: Use industry reports or market research to estimate the total market size.
- Bottom-up approach: Multiply your product price by the total number of potential customers.
Example:
If you sell a SaaS tool for $100/year and there are 1 million potential businesses:
TAM = $100 x 1,000,000 = $100M
2. Calculate SAM
SAM is the segment of TAM your product can serve.
- Consider geography, regulations, or customer type.
Example: If your SaaS only serves small businesses, and there are 400,000 small businesses:
SAM = $100 x 400,000 = $40M
3. Calculate SOM
SOM is the realistic market share you can capture.
Example: With strong marketing and a small team, you might target 10% of SAM:
SOM = 10% x $40M = $4M
TAM SAM SOM Examples
-
TAM:
All travelers globally → $500B -
SAM:
Travelers in cities where Airbnb operates → $100B -
SOM:
Target market in first 5 years → $10B
-
TAM:
All businesses using CRM software → $50B -
SAM:
Businesses in Europe → $5B -
SOM:
Realistically captured in 3 years → $500M
This demonstrates how TAM SAM SOM helps investors and founders understand scalability.
TAM SAM SOM Templates and Tools
You can use TAM SAM SOM charts, diagrams, and templates to make your data visual:
- PowerPoint pitch decks – Use TAM SAM SOM slide templates to communicate market size.
- Excel / Google Sheets – Calculate TAM, SAM, SOM with formulas.
- Online calculators – Tools like TAM SAM SOM calculator simplify the process.
Conclusion
TAM SAM SOM is an essential framework for startups, entrepreneurs, and marketers to quantify market opportunity. By understanding the total, serviceable, and obtainable market, you can make smarter business decisions, attract investors, and plan realistic growth strategies.
Whether you’re building a pitch deck, preparing a market analysis, or just estimating potential revenue, TAM SAM SOM is your roadmap to smarter scaling.
FAQs
What is TAM SAM SOM?
TAM SAM SOM is a market-sizing framework used to estimate potential business opportunities.
- TAM: Total Addressable Market—all possible customers.
- SAM: Serviceable Available Market — the segment your product can serve.
- SOM: Serviceable Obtainable Market — the realistic share you can capture.
How do you calculate TAM SAM SOM for a startup?
- TAM: Estimate total market demand (top-down using reports or bottom-up using pricing × potential customers).
- SAM: Narrow TAM to your reachable market segment.
- SOM: Estimate your achievable market share considering competition and resources.
Why is TAM SAM SOM important?
It helps startups understand market size, plan growth, communicate with investors, and design realistic marketing and sales strategies.
Can TAM SAM SOM change over time?
Yes. As your business expands or targets new regions, SAM and SOM grow, while TAM may stay the same or increase depending on market evolution.
Are there templates for TAM SAM SOM?
Yes. You can use PowerPoint slides, Excel sheets, Canva templates, and online calculators to visualize TAM, SAM, and SOM for pitch decks and strategy presentations.
