TAM, SAM, and SOM
Also known as: TAM SAM SOM, SAM, SOM
In short
TAM, SAM, and SOM describe a market at three levels. Total addressable market (TAM) is everyone who could buy. Serviceable addressable market (SAM) is the slice your product and sales model can actually reach. Serviceable obtainable market (SOM) is the share you can realistically capture soon.
Each is smaller than the one before it, which is why they are usually drawn as concentric circles.
TAM, SAM, and SOM explained
Total addressable market (TAM)
The full revenue opportunity if you won every potential customer in the category.
Serviceable addressable market (SAM)
The part of TAM that fits your product, pricing, regions, and sales channels. A product sold only in North America to mid-market companies excludes everything else from SAM.
Serviceable obtainable market (SOM)
The share of SAM you can win in a defined period, based on sales capacity, competition, and brand strength. This is the number your plan should be built on.
TAM SAM SOM example
Say 50,000 B2B software companies could use your product at $10,000 a year. TAM is $500 million.
You sell only to companies with 50–500 employees in the US and UK, which is 8,000 companies. SAM is $80 million.
With your current team you expect to win 2% of SAM in the next year. SOM is $1.6 million.
Common mistakes
- Using TAM as a target: It is a ceiling. Plans should be built on SOM.
- Confusing SAM with TAM: If your SAM is nearly your TAM, you probably have not defined your ICP tightly enough.
- Stale inputs: Refresh account counts and pricing assumptions at least yearly.
TAM, SAM, and SOM FAQs
What do TAM, SAM, and SOM stand for?
TAM is total addressable market, SAM is serviceable addressable market, and SOM is serviceable obtainable market. They estimate the whole market, the part you can serve, and the part you can realistically win.
How do you calculate SAM from TAM?
Narrow TAM using the limits of your business: the segments, regions, company sizes, and channels you actually serve. In B2B, this usually means filtering your account universe by your ideal customer profile.
What is a good SOM?
A good SOM is one you can defend with capacity. Base it on how many deals your team can work, historical win rates, and sales cycle length, rather than a flat percentage of the market.
