Market sizing with a TAM SAM SOM calculator and a method you can defend

TAM, the total addressable market, is the revenue you would earn if every possible customer bought your product at your price. It is a ceiling, not a forecast.

SAM, the serviceable available market, is the part of TAM you can actually reach with your current product, language, regions, integrations and sales model. A product sold only in English with no on premise option cannot serve every company in the TAM.

SOM, the serviceable obtainable market, is the share of SAM you can realistically win in a set period, often three to five years, given competitors, budget and sales capacity. Investors read SOM as a test of judgement, so it should be modest and explained.

A top down estimate starts from a published industry total and narrows it with percentages. It is fast, but the starting number often uses a different definition of the market than yours, and each percentage is a guess stacked on a guess.

A bottom up estimate counts the customers who could buy and multiplies by what they would pay. It takes more work, but every input can be checked. Most boards and investors trust a bottom up figure more, and the best practice is to run both and explain any gap between them.

• Top down works for a first sense of scale and for large, well documented categories.
• Bottom up works for B2B products with a clear buyer and a known price.
• A large gap between the two usually means the market definitions differ.

This is an illustrative example, not research data. Imagine a B2B software product sold to mid sized companies in one region, priced at 6,000 USD a year.

The serviceable share and the obtainable share are assumptions you should justify, for example by language support, required integrations and the win rates of comparable products. Change any input in the calculator above to see how sensitive the result is.

• TAM base. 12,000 target companies in the region.
• TAM. 12,000 x 6,000 USD = 72,000,000 USD a year.
• SAM. 30 percent are serviceable, so 12,000 x 0.30 = 3,600 companies, and 3,600 x 6,000 USD = 21,600,000 USD a year.
• SOM. A 2 percent obtainable share of SAM in three years gives 3,600 x 0.02 = 72 customers, and 72 x 6,000 USD = 432,000 USD a year.

The most frequent mistake is treating TAM as the goal. A 72 million USD TAM in the example above sounds exciting, but the plan rests on 72 customers, and that is the number to defend.

• Quoting a top down industry figure that includes segments you do not serve.
• Using a list price when most customers pay a discounted annual rate.
• Counting companies that already have a strong incumbent and no reason to switch.
• Picking a SOM share without comparing it to the share real competitors hold.
• Hiding assumptions, so nobody can tell which input drives the result.

In the market map module, MarketAgent builds TAM, SAM and SOM for the market you describe and shows the method next to each figure. Counts of target companies, published prices of the players and segment splits each link to their public source with a capture date. Anything inferred is labelled Estimate and lists the assumption behind it, so you can adjust it rather than accept a black box number.

The sizing sits alongside the competitor list and pricing in the same report, which keeps the price assumption honest. You can see a full example in the payroll software Germany sample report, or read how teams use it for corporate development and market entry.