TAM vs SAM vs SOM: How to Define and Use Market Size for Your Startup

When you’re building a startup, one of the first questions investors will ask is: “How big is your market?” That’s where TAM, SAM, and SOM come in. These three terms help you break down your market into layers—from the total market size to the share you can realistically capture.

In this article, we’ll explain what TAM, SAM, and SOM really mean, how to calculate them, and how to avoid common mistakes. You'll also learn how to use these market metrics to strengthen your fundraising and go-to-market strategy.

TAM vs SAM vs SOM

When talking about market size, you’ll often hear three terms: TAM, SAM, and SOM. They might sound a bit technical, but they’re actually pretty straightforward once you break them down.

TAM (Total Addressable Market)

TAM is the big-picture number. It shows the total demand for your product or service if everyone who could use it actually did. Think of it as your 100% market potential.

Example: If you’re building a fitness app, your TAM could be the entire global market of people who use fitness or health-related apps.

SAM (Serviceable Available Market)

SAM is a smaller slice of that total market. It focuses on the people or businesses you can actually serve based on your product, location, and resources.

Example: If your fitness app is only available on iOS and you’re launching in Europe, your SAM would be the market for iOS fitness apps in European countries.

SOM (Serviceable Obtainable Market)

SOM is the most realistic number. It’s the portion of the SAM that you believe you can capture in the short term, usually the first 1–2 years. This takes into account your team size, budget, and go-to-market strategy.

Example: Out of the iOS fitness app users in Europe, maybe you can reach 50,000 users in your first year. That’s your SOM.

Why TAM/SAM/SOM Matters for Startups

So, why does all this matter? Because investors want to know if your startup is playing in a big enough space—and if you actually understand what you’re getting into.

TAM, SAM, and SOM help you tell that story. They show VCs the size of the opportunity and how you plan to grow into it. A huge TAM shows potential, but a focused SOM proves you know where to start and what you can realistically achieve in the short term.

These numbers also help you make smarter business decisions. They guide things like:

• Pricing: Knowing your market size helps you price your product in a way that makes sense.
• Sales strategy: You can figure out which markets to target first and where to spend your energy.
• Marketing: A clear SOM helps you focus your campaigns on the customers you’re most likely to win.

Most importantly, a realistic SOM shows you’re grounded. It tells investors, “We know our limits, but we also know how to grow.” That kind of focus builds trust—and makes your pitch stronger.

How to Calculate TAM, SAM, and SOM

Now that you know what TAM, SAM, and SOM are, let’s look at how to actually calculate them. There are two main ways to do it: top-down and bottom-up. Each has its pros and cons, and sometimes it’s best to combine both.

Top-Down Approach
This method starts with big-picture data from sources like Statista, Gartner, or government reports. You take a large market number and narrow it down to fit your product.

• Pros: It’s quick and looks polished in a pitch deck.
• Cons: It can be too general and not fully reflect your specific situation.

Bottom-Up Approach
This starts with your actual data—like pricing, customer feedback, or your sales funnel—and builds up to estimate market size.

• Pros: It’s more accurate and realistic. Investors often prefer this method.
• Cons: It takes more effort and good data to get right.

Let’s walk through an example.

Imagine you’ve launched a subscription-based productivity app for freelancers in the U.S.

TAM (Total Addressable Market):
Start with a top-down estimate. Let’s say Statista reports there are 60 million freelancers worldwide. Your app could technically be used by all of them.
→ So your TAM is 60 million users.

SAM (Serviceable Available Market):
Now narrow it down. You’re only offering the app in English and targeting U.S.-based freelancers for now. Let’s say there are 15 million freelancers in the U.S.
→ Your SAM is 15 million users.

SOM (Serviceable Obtainable Market):
Now think bottom-up. Your marketing budget allows you to reach around 300,000 potential users in your first year. You estimate a 5% conversion rate based on early tests.
300,000 × 5% = 15,000 paying users.
→ Your SOM is 15,000 users.

How to Use TAM, SAM, and SOM for Your Startup

How do you actually use it for your startup? Let’s break it down into simple steps you can follow.

Step 1: Get clear on your market
Before you start calculating anything, you need to define your market.
Are you selling a product, a service, or maybe a group of products?
Who is it for? Try to be as specific as possible by thinking about:

• Where your customers live
• Their gender
• Age range
• Lifestyle or job
• The problem your product solves for them

The clearer you are about who you’re targeting, the more accurate your market sizing will be.

Step 2: Find your TAM (Total Addressable Market)
Now it’s time to research. Look up how many people match your target audience worldwide (or in your ideal markets).
Then ask yourself: If every single one of those people bought my product, how much money would that be?

For example, if you’re targeting women between 25 and 65, find out how many women are in that age group globally or in your focus regions. Multiply that by your price to estimate the total possible revenue. That’s your TAM.

Step 3: Narrow it down to your SAM (Serviceable Available Market)
This is where you get more realistic.
Let’s say you run a luxury clothing brand for professional women and you're only selling in the U.S.
Now you only count women aged 25–65 living in the U.S. who are likely to buy higher-end clothing. That’s your SAM—people you can realistically serve based on your business model and where you’re active.

Step 4: Focus on your SOM (Serviceable Obtainable Market)
SOM is the part of the SAM you can actually reach and sell to in the near future.
For example, not everyone in your SAM has the budget or need for your product. Some may not even know your brand exists yet.
So now you narrow it down again—maybe by income level, job type, or lifestyle. Think about your marketing reach, budget, and competition. Based on all that, you estimate how many customers you can realistically win. That’s your SOM.

Step 5: Use your insights to plan your next move
Now that you have your numbers, it’s time to think about strategy. Ask yourself:

• What’s happening in the market right now?
• What are competitors doing well—and where are they falling short?
• Are there customer needs that aren’t being met?
• Is there a niche you can serve better than anyone else?

TAM/SAM/SOM in Your Pitch Deck

If you’re raising money, your pitch deck needs a slide on market size. This is where you show investors how big the opportunity is—and how much of it you can actually capture.

Where does it go?
Usually, the market size slide comes early in the deck, right after your problem and solution slides. It helps set the stage and show that there’s real demand for what you’re building.

How should it look?
Keep it simple and visual. A common way to show TAM, SAM, and SOM is with:

• A pie chart that shows the three layers in different shades
• Concentric circles, where TAM is the big outer circle, SAM is the middle one, and SOM is the smallest in the center

Use clean labels and round numbers where possible to make it easy to understand at a glance.

What do investors want to see?
They want to know two things:

1. That the TAM is big enough—this tells them the potential for long-term growth is there.
2. That your SOM is focused and realistic—this shows you’re not just dreaming big but also thinking practically.

⏩️ Designing a Pitch Deck for Investors

Common Mistakes in Market Sizing

Market sizing is important but it’s easy to get it wrong. Here are a few mistakes startups often make (and how to avoid them):

1. Mixing up TAM and SAM
A common one: using your TAM number and calling it your SAM. TAM is the total market, not the group you can actually serve right now. If you confuse the two, investors will notice—and it can hurt your credibility.

2. Making SOM too optimistic
It’s tempting to aim high, but don’t say you’ll grab 10% of the market without a clear plan. Investors want to see a realistic SOM based on your current resources, team, and strategy.

3. Using vague or outdated data
If your numbers are based on old market reports or unclear sources, they won’t hold up under scrutiny. Always check the date and source of your data, and be ready to explain where it came from.

4. Ignoring your go-to-market strategy
Your SOM should match how you plan to grow. For example, if you’re planning a slow, targeted launch, your SOM should reflect that—not some huge number that doesn’t fit your approach.

⏩️Building a Go-to-Market Strategy That Actually Works

Tools & Resources to Estimate Market Size

You don’t have to figure out your market size all on your own. There are plenty of tools and resources that can help you estimate your TAM, SAM, and SOM with more confidence.

For top-down research:
These tools give you big-picture stats you can use to estimate your total market.

• Statista – Great for quick stats on industries and global markets.
• IBISWorld – Detailed market reports, especially useful for U.S. data.
• Crunchbase – Good for researching competitors and market activity.

For bottom-up research:
These help you build estimates based on actual user behavior and trends.

• Google Trends – Shows how interest in a topic or product changes over time.
• Google Keyword Planner – Helps estimate how many people are searching for products like yours.
• LinkedIn Sales Navigator – Useful for finding how many potential customers exist in certain roles or industries.

For real-world validation:
Sometimes the best data comes directly from your audience.

• Run customer surveys to learn more about demand.
• Use waiting lists or pre-orders to measure interest.
• Look at early signups or traffic from landing pages.

Free templates and calculators:
There are plenty of simple templates out there—Excel or Google Sheets models—that guide you through a TAM/SAM/SOM calculation step-by-step. Just search for “TAM SAM SOM calculator” to find one that fits your needs.

Conclusion 

Getting clear on your TAM, SAM, and SOM helps you understand your market, focus your efforts, and build a stronger pitch. It’s not about guessing big numbers—it’s about showing that you know your audience and what’s realistically possible. Whether you’re preparing for a funding round or planning your go-to-market strategy, solid market sizing gives you (and investors) the confidence to move forward.

Good to read:

⏩️Pitching Your Startup to Investors: Master the Art

⏩️How to Find Investors for Your Startup