TAM (Total Addressable Market)
The total revenue opportunity available if your product captured 100% of the market.
What it means
Total Addressable Market is the maximum revenue you could theoretically generate if every potential customer used your product. It's broken down into three layers: TAM (the entire market), SAM (Serviceable Addressable Market - the segment you can reach), and SOM (Serviceable Obtainable Market - what you can realistically capture).
Formula
TAM = Total potential customers × Average annual revenue per customer
Why it matters
TAM tells you the ceiling of your opportunity. Investors want to see a TAM large enough to build a significant business (typically $1B+ for VC-backed startups). For bootstrapped founders, understanding your SAM and SOM is more practical.
What is TAM?
TAM (Total Addressable Market) is the total revenue opportunity if you captured 100% of the market. It represents the theoretical maximum size of your business opportunity.
How do you calculate TAM?
Bottom-up: count potential customers and multiply by expected annual revenue. Top-down: start with industry reports and narrow to your segment.
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