Market sizes: Total Addressable Market, Serviceable Available Market, Serviceable Obtainable Market.
TAM, SAM, and SOM are three nested market sizes that help realistically estimate the revenue potential of a business model. TAM (Total Addressable Market) describes the entire global market for a product or service. SAM (Serviceable Available Market) is the portion of the TAM that the company could actually serve with its current offering and channels. SOM (Serviceable Obtainable Market) is the realistically achievable share within the SAM.
An example: a startup for vegan ready meals in Germany has a TAM of perhaps 30 billion euros (entire ready meal market in Europe). The SAM is 3 billion euros (vegan ready meals in the DACH region distributed via e-commerce and supermarkets). The SOM is 50 million euros (realistic market share in the first three years with limited distribution). The three levels help present the market opportunity to investors and decision-makers in a structured way without falling into unrealistic total market fantasies.
The most common mistake is the top-down argument following the pattern: the market is 100 billion, we only need 1 percent. Serious SOM estimates are based on bottom-up calculations: How many customers can we realistically reach with which channels?
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