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TAM, SAM, SOM is the standard framework for market sizing. You’ll see it in investor decks, strategy documents, and business cases. The acronyms are less important than the discipline of thinking through who your market actually is and how much of it you can realistically reach 📊

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The three layers

TAM - Total Addressable Market - the full revenue opportunity if you captured 100% of the market. Everyone who could conceivably buy a product like yours. This number is usually large and used to signal that the opportunity is worth pursuing. SAM - Serviceable Addressable Market - the portion of the TAM you can realistically serve given your product, geography, business model, and go-to-market motion. If your product is English-only and sold direct, your SAM is much smaller than your TAM. SOM - Serviceable Obtainable Market - the slice of the SAM you can realistically capture in the near term, given your current resources, competition, and stage. This is the number that should drive actual planning 💡

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Bottom-up vs. top-down

There are two ways to calculate market size, and they produce very different numbers: Top-down - start from a large industry figure and work down. “The global HR software market is 30B,we′retargetingSMBswhichare2030B, we're targeting SMBs which are 20% of that, so our TAM is 6B.” Fast to produce, easy to manipulate, often disconnected from reality. Bottom-up - start from your actual potential customers. “There are 500,000 SMBs in our target segment. Average contract value is 2,400/year.That′sa2,400/year. That's a 1.2B SAM.” More work, but grounded in real assumptions you can stress-test. Investors prefer bottom-up. So should you.

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What the numbers are actually for

Market sizing isn’t primarily about impressing investors - it’s a thinking tool. The process of estimating TAM, SAM, and SOM forces you to be specific about who your customer is, what you’re charging, and how you’re planning to reach them. The assumptions behind the numbers are more valuable than the numbers themselves. A TAM of 500Mbuiltfromclear,defensiblelogicismoreusefulthanaTAMof500M built from clear, defensible logic is more useful than a TAM of 5B built from hand-waving 🙌 Lesson learned: every time I’ve seen TAM cited in a product strategy conversation, the more useful question was “what’s our SOM for the next 18 months, and what would need to be true to double it?” That’s the number that drives decisions.