TAM

• Total Addressable Market is the total market demand for a product or service in the market, in revenue terms.
• It's the maximum revenue you’d have if you captured 100% of the market share.
• Its useful for businesses to objectively estimate a specific market’s potential for growth
• Calculated by multiplying the number of potential customers by the average revenue per occasion multiplied by number of occasions.

TAM Myths

TAM is the only important metric to consider

• Focusing solely on TAM can lead to unrealistic expectations and poor resource allocation and worse miss out on opportunities.
• A startup targeting a niche market may have a small TAM but a high SOM potential. If the company only focuses on TAM, it may miss the opportunity to capture a significant portion of its SAM.

TAM is a fixed number

• It's not a fixed number, and entrepreneurs need to be aware of these changes to adapt their strategies accordingly.
• This true especially in new technology and innovative products. The rise of electric vehicles has increased the TAM for electric vehicle charging stations.
• It can also shrink.
• The TAM for traditional bookstores has been shrinking over the past decade as more consumers switch to e-books and online retailers.
• It also varies depending on the market being considered.

TAM is the same for every business

• Explanation: TAM can vary widely between different businesses, even within the same industry. Companies need to determine their unique TAM based on their target

SAM

• Serviceable Available Market is the segment of the TAM that a you can actually target.