TAM SAM SOM Calculator — Market Size for a Business Plan
Estimate total addressable market (TAM), serviceable available market (SAM) and serviceable obtainable market (SOM) bottom-up from customer count, annual revenue per customer and realistic reach.
How it works
TAM = potential customers × annual revenue per customer · SAM = TAM × share you can serve · SOM = SAM × share of SAM you can win · Customers served = customers × SAM % × SOM %
TAM, SAM and SOM size a market in three nested circles. TAM is all the annual revenue available if every possible customer bought; SAM is the part your product, price point, channels and geography can actually reach; SOM is the slice of SAM you can realistically capture in the next few years against competitors. Investors trust bottom-up estimates (customers × price) more than top-down percentages of an industry report, and they expect SOM to be modest — a few percent of SAM for a new entrant.
Worked example
With 500,000 potential customers each worth $1,200 a year, TAM = $600,000,000. If 30% are reachable, SAM = $180,000,000 (150,000 customers). Winning 5% of SAM gives a SOM of $9,000,000 a year from 7,500 customers — 1.50% of TAM.
Sources: Wikipedia — Total addressable market · U.S. SBA — Market research and competitive analysis
Frequently asked questions
How do you calculate TAM, SAM and SOM?
Bottom-up: TAM = number of potential customers × annual revenue per customer. SAM = TAM × the share you can reach with your product and channels. SOM = SAM × the share you can realistically win.
What is a realistic SOM?
For a new business, a few percent of SAM over 3–5 years is a credible starting point. Base it on your sales capacity, conversion rates and competitors' shares rather than a round guess.
What is the difference between TAM and SAM?
TAM counts every possible buyer of this type of product anywhere; SAM narrows it to buyers your specific offer can serve — the right segment, region, language, price point or regulation.
Should I use top-down or bottom-up market sizing?
Use bottom-up (customers × price) as your main estimate because it shows your assumptions, and check it against top-down industry figures. Large gaps between the two reveal a wrong assumption.
Related calculators
Planning estimate only. Real results depend on your actual costs, prices, taxes and market — check the figures with your accountant or adviser before making business decisions.