This informal CPD article ‘Know Your Market: Mastering TAM, SAM, and SOM for Strategic Growth’, was provided by Svea Schüler, Strategic Initiatives Coordinator at MarketSizer, an organisation which provides professional training in market sizing and account prioritisation, equipping businesses with the skills to optimise customer acquisition, expansion, and retention strategies.
Introduction
Imagine you've conceptualised an innovative business idea: an application that maps gyms, yoga studios, and healthy food options based on your location. You've registered your startup and developed a minimum viable product (MVP).
Now, during a pitch to a venture capital firm, an investor inquires, "What is your total addressable market size? And how does your solution differentiate from existing platforms?"
You might think your unique selling proposition (USP) and market potential are evident—targeting everyone interested in fitness and healthy eating. However, a deeper analysis is essential.
Why Market Sizing Matters
Market sizing is a critical process that assesses the viability of your business idea. Regardless of your team's excellence or the enthusiasm of your peers, the market's reality prevails.
Investors will seek assurance that you've thoroughly evaluated the market landscape, identified a feasible entry point, and projected sustainable growth. In today's investment climate, demonstrating both substantial growth potential and future sustainability is imperative.
In this article, we'll explore:
- The Different Types of Markets (And Why They Matter)
- What market sizing is & why you should care
- Understanding TAM, SAM, SOM
- What factors influence TAM, SAM, SOM
- Common challenges when doing market sizing
Exploring Market Types
Before we talk about how big your market is, let's first get clear on what kind of market you're actually in. Investors will often ask something deceptively simple like:
"So, are you in B2B or B2C?"
"Are you in a niche or mass market?"
A surprisingly large number of founders hesitate here — not because they don’t know, but because they haven’t framed it in investor language.
Here are the four key ways markets are categorised:
- Customer Type
- Consumer Markets (B2C): Direct sales to individual consumers, such as fitness apps or e-commerce platforms.
- Business Markets (B2B): Offering products or services to other businesses, like SaaS tools or logistics solutions.
- Industry or Sector
- Private Sector: Industries like technology, retail, or hospitality.
- Public Sector: Government-run organizations, including healthcare and education.
- Financial Markets: Trading of financial assets like stocks and bonds.
- Geographic Scope
- Local Markets: Operating within a specific city or region.
- National Markets: Covering an entire country.
- International Markets: Serving multiple countries or global audiences.
- Market Focus
- Niche Markets: Targeting a specific customer base with unique needs.
- Startup or Innovation-Driven Markets: Emerging markets shaped by new technologies or disruptive ideas.
Market sizing provides hard evidence
What exactly is Market Sizing and why should I care?
Market sizing is the process of estimating the potential size and value of a specific market. It involves crunching numbers, analysing a lot of data, and making informed projections to gauge the scope of any business.
As you might have gathered in the introduction, market sizing has a profound role in the fundraising journey. How much actual maths you'll need to present depends on the stage of your startup. At an early stage, it's much more about if investors intuitively get the market opportunity. At growth stage, you might have to whip up the top-down and bottom-up calculations on a whiteboard.
Market sizing provides hard evidence that your idea is not just a vision but grounded in reality. It demonstrates that you've done your homework, understand the market you want to enter (or its potential), and have a well thought out strategy for capturing a share of it. This reassures investors that their funds are backing a well-informed and promising endeavour, making it far more likely for them to commit to your startup.
Although market sizing data has its great debut in the funding journey, you should see it more as constructing the foundation of a building - it sets the stage for everything that follows and can make or break it in the future beyond impressing investors. It's an essential tool to business strategy and growth planning, but for many it's a one-off exercise and collects dust in some folder after.
In a nutshell, market sizing helps you...
- Attract investors by showcasing a clear understanding of the market you want to enter and potential revenue.
- Define your go-to-market strategy because you do research on your ideal customer base, which helps you develop effective marketing and sales strategies
- Identify the potential revenue you could generate in your target market, which is a number all investors are interested in
- Differentiate your startup's product and find your USP by conducting competitor analysis to find out your Serviceable Addressable Market (SAM). If you're at a really early stage, this even helps you to prioritise features for your MVP.
- Make business decisions with confidence because you can make them data-driven and research-based - and not out of thin air.
Understanding TAM, SAM, and SOM
When talking to investors, strategizing your next move, or even just validating your business idea, a well-thought-out market sizing framework can make all the difference. The three most widely used metrics in this space are TAM, SAM, and SOM. While they sound like jargon, understanding what they represent — and how they work together — is essential for building a scalable, investor-ready business.
Let’s break each one down:
1. Total Addressable Market (TAM)
TAM is the big-picture view — the total demand for your product or service if you could hypothetically serve every potential customer in your target market. Think of it as your "universe of opportunity" without any practical limitations.
If your product solves a problem for people who go to the gym, and you could somehow reach every gym-goer in the world, that would be your TAM.
It’s a useful metric to:
- Understand the scale of the opportunity
- Set long-term growth ambitions
- Grab attention in the investor deck with a big headline number (but only if it’s grounded in logic)
However, no business ever captures 100% of a market.
2. Serviceable Addressable Market (SAM)
SAM zooms in from the total market to only the portion that your product or service can realistically serve. This depends on your business model, target audience, geography, and capabilities.
For example:
- If your app helps people find healthy restaurants in Ireland, your SAM might include health-conscious individuals in urban areas with smartphones — not the entire population.
- If you only support iOS, or only list vegetarian options, those filters further narrow down your SAM.
SAM gives you a much clearer picture of:
- Who your actual customers could be
- Where to focus your go-to-market efforts
- How to prioritise features in your product roadmap
3. Serviceable Obtainable Market (SOM)
If TAM is your galaxy and SAM is your solar system, then SOM is your planet. This is the slice of the market you can realistically capture in the short-to-medium term, based on your:
- Budget
- Sales and marketing reach
- Competitive landscape
- Team size and resources
Think of SOM as your starting line — it’s what you pitch as your initial growth plan and revenue potential. Investors care a lot about this number because it’s grounded in execution, not theory.
Your SOM answers questions like:
- “How many users can we actually reach this year?”
- “How many can we convert based on our current marketing budget?”
- “What percentage of the market can we reasonably win, considering our competition?”
Sales and Marketing Effectiveness
Factors Influencing TAM, SAM, and SOM
Several factors can impact your market estimates:
- Product Development/Innovation: Adding new features or products can expand all three metrics.
- Geographical Expansion: Entering new regions or countries increases TAM, SAM, and SOM.
- Strategic Partnerships: Alliances can help reach more consumers, growing SAM and SOM.
- Business Model Changes: Alterations can help serve larger parts of the TAM.
- Regulatory Changes: New laws can widen the range of potential customers.
- New Distribution Channels: Launching on additional platforms can widen SAM and SOM.
- Market & Societal Trends: Shifts in behaviour can lead to increases in all metrics.
- Acquisitions: Acquiring another company can instantly expand your SAM and SOM.
- Sales and Marketing Effectiveness: Improving these can increase your SOM.
- Resource Limitations: Overcoming these can increase your SOM.
- Economic Growth: Increased wealth can expand the TAM.
- Demographic Shifts: Changes in population can influence the TAM.
Common Challenges in Market Sizing
Market sizing sounds straightforward on paper — but in real-world scenarios, it often gets tricky. Especially for early-stage startups or businesses bringing entirely new concepts to life.
Here are some of the most common roadblocks founders face:
1. Lack of Reliable Data
If you’re entering an emerging or undefined market, there may not be enough historical data to draw from. This makes it hard to back up your assumptions with concrete numbers.
Example: When ride share apps launched, ride-sharing wasn’t a category. So how do you size a market that doesn’t technically exist yet? You estimate based on adjacent industries — like urban transportation.
2. New Product Categories
Innovative products often don’t fit neatly into existing market definitions. This makes it difficult to benchmark against competitors or standard industry reports.
You may need to triangulate your TAM/SAM using creative proxies — which can feel more like art than science.
3. Customer Inertia
Even if your solution is clearly better, customers might be locked into long-term contracts or deeply integrated tools — especially in B2B markets.
Switching takes time, money, and effort. This kind of friction reduces your obtainable market in the short term, even if the overall opportunity is large.
Conclusion
TAM, SAM, and SOM aren’t just buzzwords — they’re powerful tools that help transform bold ideas into viable businesses. Whether you're pitching to investors, refining your go-to-market strategy, or simply trying to understand your true growth potential, market sizing gives you the clarity to move forward with confidence. It forces you to ask the right questions, challenge your assumptions, and ground your vision in data — not just instinct.
The difference between a promising concept and a fundable, scalable business often comes down to how well you understand the market you’re stepping into. So don’t treat market sizing as a formality — use it as your compass. Because when you truly know your market, you don't just enter it — you lead it.
We hope this article was helpful. For more information from MarketSizer, please visit their CPD Member Directory page. Alternatively, you can go to the CPD Industry Hubs for more articles, courses and events relevant to your Continuing Professional Development requirements.
References:
- https://www.slidegeeks.com/powerpoint/Market-Size
- https://www.mostlymetrics.com/p/e8-the-ultimate-guide-to-tam-total-ef9
- https://www.alexanderjarvis.com/how-big-can-this-get-market-sizing-has-killed-many-startup-fundraises/
