Finance
TAM / SAM / SOM
A three-layer market-sizing frame: Total Addressable Market (everyone who could theoretically buy), Serviceable Addressable Market (segment your product actually reaches), Serviceable Obtainable Market (share you can realistically win in the near term).
By Maya Okonkwo · Last updated July 22, 2026
In plain English
TAM is the fantasy number; SAM is the honest number; SOM is the number that pays your salary in year one. Investors want to see all three plausibly reasoned; they'll ignore TAM if SOM feels made up.
Example
A payroll SaaS for US dentists: TAM = 200k US dentists × $2.4k ARPU = $480M. SAM = 40k solo/2-person practices you can reach via digital = $96M. SOM = capturing 1% in year one = $960k ARR.
Formula
TAM = customers × ARPU · SAM = TAM × addressable share · SOM = SAM × obtainable share
Why it matters
Sizing that starts from TAM and works down beats sizing that starts from your last round and works up. Every fundraise conversation needs a number the founder can defend from first principles.
Common mistakes
- Presenting TAM as if it's revenue
- Sizing from analyst reports (Gartner numbers) instead of customer count × ARPU (bottom-up)
- SOM that assumes 5%+ share in year one — nobody believes it