TAM (Total Addressable Market)
Definition
TAM is the total revenue opportunity if you captured 100% of your target market. Used to estimate market size for investors.
What Is TAM (Total Addressable Market)? How to Calculate It
TAM = Total Addressable Market. It answers: how big could this get? Example: if 10M companies need project management software and average contract is $5k/year, TAM is $50B. TAM > SAM > SOM. SAM (Serviceable Available Market) = portion you can reach. SOM (Serviceable Obtainable Market) = what you can realistically capture. Investors want TAM over $1B for VC-scale returns.
Examples
If 10 million companies need project management software and the average contract is worth $5,000 a year, TAM is 10 million times $5,000, which is $50 billion. That figure represents the ceiling if you captured every single potential customer, not a realistic near-term target.