If you are building a business plan or reviewing a pitch deck, you will see the terms TAM, SAM, and SOM come up constantly. They are essential tools for estimating how much revenue a company could potentially capture. Knowing how to calculate TAM, SAM, and SOM is critical. These numbers show whether an idea can scale, how large the opportunity really is, and whether it is worth the investment.

What are TAM, SAM, and SOM?

Before you can calculate them, it helps to understand what they measure.

• TAM (Total Addressable Market): The total demand for your product or service, assuming unlimited reach and no constraints.
• SAM (Serviceable Available Market): The portion of that market your business’s products or services can actually serve, given your model or geography.
• SOM (Serviceable Obtainable Market): The share of SAM you can realistically capture in the next few years with your current resources and plan.

How to calculate TAM

TAM is the broadest figure. It shows how large the global or total market is for your type of product.

Top-down approach

Use existing market research.

• Example: If global spending on skincare is $150 billion, then the TAM for skincare is $150 billion.

Sources: IBISWorld, Statista, public company filings, or trade associations.

Bottom-up approach

Calculate from potential customers and spending.

• Example: If there are 50 million people who buy skincare and they spend $100 each per year, the TAM is $5 billion.

This approach is often stronger because it ties directly to realistic consumer behavior.

How to calculate SAM

SAM narrows it to what your business can serve with its current product focus or geographic reach.

• Example: If your skincare line is only for sensitive skin and that segment is 20 percent of the total market, your SAM is $30 billion.
• Or if you only sell in the U.S. and the American skincare market is $50 billion, that becomes your SAM.

How to calculate SOM

SOM is your most grounded number. It shows the share of SAM your company can realistically capture soon, based on your go-to-market strategy and operational plan.

• Example: If your SAM is $30 billion, but you project you can realistically reach 1 percent of that over the next five years with your team and budget, your SOM would be $300 million.

Why these numbers matter

• For founders: It forces you to prove your business is tackling a market large enough to justify your time and effort.
• For investors: It shows whether the upside is worth the risk.
• For operators: It guides marketing, hiring, and expansion planning.

Markets that are too small can limit your future. Markets that look enormous but have a tiny realistic slice can be just as misleading.

The bottom line

Knowing how to calculate TAM, SAM, and SOM gives you a clear view of how big the opportunity is, how much of it your business can serve, and what share you might realistically win. It takes big ideas and grounds them in actual numbers.

If these figures are missing or inflated without a solid plan, that is often the first sign the opportunity needs more work before you invest or commit resources.