Glossary
TAM SAM SOM
TAM, SAM and SOM are three nested market-size estimates. Total addressable market (TAM) is all possible demand, serviceable available market (SAM) is the part your product and channels can reach, and serviceable obtainable market (SOM) is the share you can realistically win.
What Is TAM SAM SOM?
In short You calculate them top-down or bottom-up.
Top-down starts from an industry total in a market report and narrows it. Bottom-up counts the companies that fit your ideal customer profile and multiplies by what each would pay a year. Bottom-up numbers are easier to defend because every input can be checked.
The three numbers answer different questions. TAM tells you whether the market is big enough to matter. SAM reflects your real limits today: geography, language, product fit and segment. SOM is a near-term target, often set from your current win rate and sales capacity over the next one to three years.
TAM SAM SOM Example
TAM = all potential customers x annual revenue per customer
SAM = customers you can serve today x annual revenue per customer
SOM = SAM x share you can realistically winExample with assumed inputs: a scheduling tool for dental practices charges $1,200 a year. If 200,000 practices worldwide could use it, TAM is $240 million. If 35,000 of them are in the US and run a compatible practice system, SAM is $42 million. Winning 2% of SAM in three years, 700 practices, gives a SOM of $840,000 a year.
TAM SAM SOM in Practice
For outbound teams, SAM is the most practical number. It's the count of accounts you could contact this quarter, and it sets how long a list lasts. If your SAM is 4,000 companies and you reach 1,000 a month, you cycle through it in four months, so the message and timing for each account matter more than volume.
FAQ
What is the difference between TAM, SAM and SOM?
TAM is the whole market if you won every possible customer. SAM is the part your product, geography and channels can serve today. SOM is the share of SAM you can realistically win in a set period, given competitors and your capacity.
How do you calculate TAM?
Multiply the number of potential customers by the average annual revenue per customer. Salesforce's bottom-up version multiplies the number of accounts in your industry by your annual contract value.
How do you calculate SOM?
Apply a realistic market share to SAM, based on your win rate, sales capacity and competition over a set period, often one to three years. There's no fixed formula; the share is a judgment you should be able to defend.
Does SAM mean serviceable available or serviceable addressable market?
Both names are used for the same idea. Salesforce itself uses both: serviceable available market in its small business guide and serviceable addressable market in its TAM guide.
Is top-down or bottom-up market sizing better?
Bottom-up is easier to defend because each input, the number of accounts and the price, can be checked. Top-down, from industry reports, is a quick check on the ceiling.
Do This in Ken
Do This in Ken
Search Ken's 24M companies for free to build the account list behind your SAM, and pay only for the contacts you reach: 1 credit per valid email.
- Module
- Ken Search
- Open in Ken
- /features
The new Ken opens to the waiting list in batches.
Related
Sources
| Source | Checked |
|---|---|
| Salesforce: What Is Total Addressable Market (TAM)? | |
| Salesforce: TAM, SAM and SOM Made Simple | |
| TechTarget: What Is TAM SAM SOM? |
Changelog
- Page published.