How to measure your market size with TAM, SAM, and SOM

Understanding market size is crucial for both new product launches and scaling existing ventures, as it involves analyzing demand trends, growth areas, competitive advantages, and underserved niches. Key metrics such as total addressable market (TAM), serviceable available market (SAM), and serviceable obtainable market (SOM) transform market data into actionable insights to guide business decisions and strategies. TAM quantifies the total potential demand for a product in a specific market, calculated using top-down and bottom-up approaches, while SAM narrows this to the portion of the market realistically accessible to a business, considering factors like geographical and regulatory constraints. SOM further refines SAM by estimating the market share a company can realistically capture, factoring in operational efficiency, capabilities, and existing market share. These metrics collectively provide a comprehensive framework for businesses to identify their potential revenue opportunities and develop targeted growth strategies.