TAM SAM SOM

TAM (Total Addressable Market): every dollar of annual demand in the category if there were no constraints — 100% market share. SAM (Serviceable Addressable Market): the subset of TAM that your specific product, geography, price point, and business model can actually reach. If you sell English-language software to mid-market US companies, customers in other languages, sizes, or countries are in TAM but not SAM. SOM (Serviceable Obtainable Market): the realistic share of SAM you can win in a defined window (typically 3-5 years) given your competitors, sales capacity, and capital. SOM is what should drive your actual revenue forecast; TAM is what justifies the ambition.

Start with a credible bottom-up TAM (potential customers × annual revenue per customer). Derive SAM by filtering TAM to who you can serve today: apply geography, segment, language, and product-fit constraints — e.g. TAM of $10B but only 40% is in your launch markets and target segment, so SAM = $4B. Derive SOM by applying a realistic market-share assumption to SAM over your forecast horizon: if you can credibly reach ~5% share of a $4B SAM in 5 years, SOM ≈ $200M. The SOM market-share number should be benchmarked against what comparable companies actually achieved — not pulled from thin air.

Investors want TAM big enough to build a fund-returner, SAM credible enough that the product clearly fits, and SOM grounded enough that it ties to the financial model. The classic abuse is the '1% of a huge market' slide — '$1T TAM, we just need 1% = $10B.' Sophisticated VCs treat that as a red flag because it skips SAM and SOM entirely and assumes share appears by magic. The credible version: bottom-up TAM, an honest SAM that reflects real constraints, and a SOM justified by your actual go-to-market and comparable benchmarks.