TAM / SAM / SOM

TAM, SAM, and SOM are three ways to estimate the size of your market opportunity, each progressively more realistic. Think of them as concentric circles, from largest to smallest.

Total Addressable Market (TAM) is the total revenue opportunity if you captured 100% of the market with no competition and no constraints. It's the theoretical ceiling. For a business banking product, TAM might be 'all small businesses in the US that need banking' — a massive number, often in the tens of billions.

Serviceable Addressable Market (SAM) narrows the focus to the portion of TAM that your product can actually serve. Maybe your product is designed for US-based businesses with under 50 employees and digital-first operations. That's a subset of all small businesses — still large, but more realistic.

Serviceable Obtainable Market (SOM) is the slice of SAM you can realistically capture in the near term given your resources, competition, go-to-market strategy, and geographic focus. This might be 'freelancers and startups in tech hubs who are actively looking for a new banking solution.' SOM is usually 1-5% of SAM for early-stage companies and is the number that should drive your actual revenue projections and hiring plans.

Market sizing is a required section of every investor pitch deck, and how you present it signals your sophistication as a founder. Quoting a $500 billion TAM without drilling into SAM and SOM makes you look naive — every market is big if you zoom out far enough. Investors want to see that you understand your realistic addressable opportunity and have a credible plan to capture a meaningful slice. A well-researched SOM also serves as a reality check on your growth projections: if your 3-year revenue forecast implies capturing 40% of your SOM, that's aggressive but potentially credible. If it implies 200% of SOM, your model is broken.