Total Addressable Market (TAM)

Understanding Total Addressable Market (TAM)

Total Addressable Market (TAM) represents the total revenue opportunity available for a product or service if it achieved 100% market share. It helps startups understand the size of the opportunity and set realistic goals for capturing a portion of that market. Calculating TAM is essential for determining a business’s growth potential and attractiveness to investors.

Methods for Calculating TAM

• Top-Down Approach: Uses industry reports and data to estimate the market size.
• Bottom-Up Approach: Estimates market size based on current sales and market penetration rates.
• Value Theory Approach: Considers the value provided to customers and prices accordingly.

Related Terms and Concepts

Market size, Serviceable Available Market (SAM), Serviceable Obtainable Market (SOM), market research