Key takeaways
- Total addressable market (TAM) is the revenue available if you captured every possible customer for your service. Serviceable available market (SAM) narrows it to customers you can actually serve, and serviceable obtainable market (SOM) is the share you can realistically win.
- Bottom-up calculations, built from the number of target customers multiplied by what each one would spend, are usually more reliable than top-down market estimates.
- Public data makes this doable for any business. The SBA Office of Advocacy reports 36,207,130 small businesses in the United States, and Census data breaks businesses down by industry and location.
- Search demand from keyword research adds a reality check on how many people actively look for what you offer.
- Use market sizing to compare segments and locations, set realistic goals and decide where to invest, not to impress anyone with a large number.
Your total addressable market is the total revenue opportunity available if your business captured 100% of the market for your product or service. No business wins every customer, but sizing the market grounds your growth plans in reality. It shows whether a segment is big enough to pursue, which locations deserve investment and how much room you have to grow. This Emulent guide covers TAM, SAM and SOM, how to calculate them, which data sources to use and how to apply the numbers to growth decisions. It is general guidance, not financial advice.
What are TAM, SAM and SOM?
The three numbers move from the theoretical market to the realistic one.
- TAM (total addressable market): every potential customer for your type of product or service, multiplied by what they would spend in a year.
- SAM (serviceable available market): the part of TAM you can reach and serve, limited by geography, industry focus, company size, language or delivery model.
- SOM (serviceable obtainable market): the share of SAM you can realistically win in the next few years, given competition, budget and capacity.
For example, a commercial cleaning company’s TAM might be every office building in the state. Its SAM might be offices within a 30-mile radius of its two locations. Its SOM might be the share of those offices it can win given its crew size and the number of competitors.
How do you calculate total addressable market?
Use a bottom-up method where possible, then compare it with any top-down estimates you find.
| Step | What to do |
|---|---|
| Define the customer | write a clear description of who buys from you, such as dental practices with two or more locations, or homeowners with houses older than 20 years. |
| Count the customers | use public data to estimate how many fit the definition in your target area. |
| Estimate annual spend | use your own average contract value or order value, adjusted for how often customers buy. |
| Multiply | number of potential customers times annual spend gives TAM. |
| Narrow to SAM | apply your real limits, such as service radius, industries served or minimum project size. |
| Estimate SOM | apply a realistic market share based on your current share, competitor count, sales capacity and growth budget. |
| Cross-check top-down | compare your result with published market studies or association data, and investigate big differences. |
Write down every assumption. Market sizing is only as good as its inputs, and documented assumptions make it easy to update when you learn more.
Which data sources help you size a market?
Combine public data, search data and your own records for a well-rounded estimate.
- Census Bureau: County Business Patterns and Nonemployer Statistics count businesses by industry code and location; the American Community Survey covers households and demographics.
- SBA Office of Advocacy: small business profiles by state and metro area.
- Industry associations and trade publications: market size estimates and spending benchmarks.
- Search data: monthly search volume for your services by location shows active demand.
- Competitor analysis: Competitive research estimates rivals’ traffic and visibility, which hints at how the market is divided.
- Your CRM: average deal size, win rate and the share of leads that fit your target profile.
- Customer interviews: how much customers spend on your category and on alternatives.
How do you use market size to set growth plans?
The value of market sizing lies in the comparisons and decisions it supports.
- Compare segments: size each industry, customer type or service line and focus on those with the best mix of size, fit and competition.
- Compare locations: decide where to open, expand or advertise based on SAM by city or region.
- Set realistic targets: base revenue and lead goals on SOM instead of wishful thinking.
- Plan marketing budget: larger obtainable markets can justify more investment in SEO, ads and content.
- Shape positioning: a small but underserved segment can be worth owning through your brand strategy.
- Guide content and website: build pages for the segments and locations with the most opportunity, through your content strategy and website design.
Update market sizing yearly, or whenever you add services, enter new markets or see a major economic shift. Results vary by industry, data quality and assumptions.
How the Emulent team can help
Emulent sizes markets using public data, search demand, competitor analysis and your own sales data, then turns the results into segment and location priorities. We build the SEO, content, website pages and campaigns to capture the opportunities with the best return. To find where your biggest growth opportunities are, contact the Emulent team.