What is TAM SAM SOM?
TAM = Total Addressable Market
SAM = Serviceable Addressable Market
SOM = Serviceable Obtainable Market
Total Addressable Market
Total Addressable Market (TAM) is the total possible market size for your company’s product/service. This is the MAX revenue your business could generate (assuming your competitors don’t take any market share)!
Serviceable Addressable Market
Serviceable Addressable Market (SAM) is the sub-market that you will serve (i.e. region, demographic, niche, etc.)
Serviceable Obtainable Market
Serviceable Obtainable Market (SOM) is a portion of the SAM you plan to pursue first with your startup! Remember, you have limited resources to begin with when first launching a startup, so you should practice the 80/20 rule and focus on the EASIEST customers first!
EXAMPLE: Finding Your TAM SAM SOM
Say you are starting a smoothie shop in your local city. First, you need to find your TAM for all restaurants in your city from data websites like https://www.bls.gov
The TAM annual revenue for all restaurants in your city is $100m. Of those restaurants, 5% are smoothie shops. So $100m x 5% = $5m SAM.
There are 12 total smoothie shops accounting for that $5m SAM, so we divide that to find our SOM. $5m / 12 = $417k SOM for a single smoothie shop location (this can increase when you expand via franchise locations, etc.)
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