TAM, SAM and SOM are three layers of market size. TAM is the annual revenue if everyone with the problem bought; SAM is the part the product can serve today (region, channel, segment); SOM is the part of the SAM you can win within a realistic period. The bottom-up calculation, with countable customers and a real price, is usually more reliable than the top-down one.
How to use
- Choose the currency and fill in one or both methods: top-down (population, share with the problem, annual value) or bottom-up (customers, price, purchases per year).
- Enter the serviceable share (SAM) and the obtainable share (SOM), as percentages.
- Say in how many years the SOM should be reached.
- Read the figures, the comparison between methods, the assumptions and the warnings.
- Export as PNG, CSV or Markdown for the business plan or the presentation.
What each field asks for
| Field | What to enter |
|---|---|
| Currency | Only used to display the values. |
| Market population (top-down) | People or companies in the broad market. |
| Share with the problem | How much of the population has the problem the product solves. |
| Annual value per customer | How much each customer would spend per year on the solution. |
| Possible customers (bottom-up) | Customers you can count, one by one, from data. |
| Price per purchase | Price of one purchase or one monthly fee. |
| Purchases per year | Monthly fee = 12, annual purchase = 1. |
| Serviceable share (SAM) | How much of the TAM the product serves today: region, channel, language, segment. |
| Obtainable share (SOM) | How much of the SAM you expect to win within the period. |
| SOM period | In how many years the SOM should be reached. Empty counts as 3. |
Example
A fictional cash management app for small restaurants runs both calculations. Top-down: 1,000,000 establishments × 30% with the problem × £1,200 per year = £360 million. Bottom-up: 280,000 possible customers × £99 × 12 months = £332.6 million, the TAM used for the headline figures. With 40% serviceable, the SAM is £133.1 million; with 3% of the SAM in 3 years, the SOM is £4 million per year, about 3,360 customers. The two methods are close, so there is no divergence warning.
When to use
- When assessing a product idea or a new market, before investing.
- To build the business plan or the presentation for investors or the board.
- To compare segments and choose where to start.
- To review the revenue target: the SOM shows whether the target fits the serviceable market.
Frequently asked questions
What are TAM, SAM and SOM?
TAM (total addressable market) is the annual revenue if everyone with the problem bought. SAM (serviceable addressable market) is the part the product serves today. SOM (serviceable obtainable market) is the part of the SAM you expect to win within a set period.
What is the difference between top-down and bottom-up?
Top-down starts from a large number (population, market report) and applies percentages. Bottom-up counts possible customers one by one and multiplies by price and frequency. The second is usually more convincing because each assumption can be checked.
What SOM is realistic?
It depends on channel, competition and timeframe, but new products rarely exceed 10% of the SAM within a few years. The tool warns above that point. Justify the share with what supports it: sales capacity, channels, partnerships.
What goes into the SAM?
Whatever limits the product’s reach today: the region where it sells, language, channel, segment, regulation. If the product only works for restaurants with electronic invoicing, for example, the SAM is that part of the TAM.
What if the methods diverge?
A difference of up to two times is common. Above that, review the assumptions: the share with the problem, the annual value per customer and the customer count. Divergence almost always points to an optimistic assumption.
Can I use it for an internal or B2B product?
Yes. In B2B, count companies instead of people and use the annual contract value. For an internal product, swap revenue for cost avoided or hours saved and keep the same layered logic.