TAM SAM SOM Meaning
- TAM (Total Addressable Market): the yearly revenue if every possible customer bought your product.
- SAM (Serviceable Available Market): the part of TAM your product, geography and channels can actually reach.
- SOM (Serviceable Obtainable Market): the part of SAM you can realistically win in about three years.
Each layer is a subset of the one before. The glossary has a shorter reference in TAM SAM SOM explained.
TAM SAM SOM Formula
Bottom-Up (Preferred)
Market = number of customers × annual price per customer
Run it three times: all customers for TAM, the customers you can serve for SAM, and the customers you expect to win for SOM.
Top-Down
Market = industry report figure × percentage that fits your product
Top-down is quick but depends on another publisher's category definition. Use it to cross-check your bottom-up result.
TAM SAM SOM Example: Dental Software in Finland
Illustrative numbers for a B2B SaaS that manages patient recalls for dental clinics, priced at €2,400 per clinic per year.
| Layer | Who | Customers | Market |
|---|---|---|---|
| TAM | Dental clinics in the EU | 85,000 | €204M |
| SAM | Nordic clinics with 3+ dentists | 2,500 | €6.0M |
| SOM | Clinics won in 3 years (4% of SAM) | 100 | €240,000 |
Sources for a real version would be Eurostat for the EU clinic count and national dental associations for the Nordic split. Need a valuation view of the same market? Try the valuation calculator.
What Investors Check
- SOM sits at roughly 1-10% of SAM, and you can explain why.
- The bottom-up math is there: customer count multiplied by annual price.
- Every input has a source, such as a national statistics office, Eurostat, an industry association or a named report.
- TAM is big enough that a successful outcome could return the fund.
Common Mistakes
- Quoting a global analyst figure as your TAM without narrowing it to your customer.
- Skipping the step from SAM to SOM, so the 1-10% share looks invented.
- Using only top-down numbers with no customer count or price behind them.
- Counting total spend in an adjacent category instead of what customers would pay you.
- Mixing currencies or years between TAM, SAM and SOM.