TAM (Total Addressable Market) The total global or national revenue opportunity for a product or service category, assuming 100% market capture. TAM is a theoretical ceiling — it frames the scale of the opportunity but does not represent a realistic near-term target.
SAM (Serviceable Addressable Market) The portion of TAM that a business can realistically serve given its product, geography, language, and go-to-market capabilities. SAM narrows TAM to the realistic competitive arena.
SOM (Serviceable Obtainable Market) The portion of SAM a company can capture in the near term, based on sales capacity, competitive dynamics, and pricing. SOM is the most defensible number in a market sizing exercise — investors scrutinize it most closely.
Top-Down Market Sizing A market sizing approach that starts with total industry size from third-party reports (e.g., IDC, Gartner) and applies a series of percentages to narrow down to SAM and SOM. Fast but dependent on the quality of the external data source.
Bottom-Up Market Sizing A market sizing approach that starts from unit economics — price per customer × number of reachable customers — and aggregates up to a market estimate. More credible in investor pitches because it ties directly to observable sales data.
CAGR (Compound Annual Growth Rate) The mean annual growth rate of a market over a specified period, assuming the growth compounds year-over-year. Used to project TAM, SAM, and SOM into the future. Industry CAGR estimates are available from market research firms.
Market Capture Rate The percentage of a target market (SAM) that a company wins as revenue. Early-stage companies typically achieve 1–5% capture. Capture rate is constrained by sales capacity, brand awareness, and competitive intensity.
ACV (Annual Contract Value) The average annualized revenue from a single customer contract. Used in bottom-up market sizing: SAM = (Number of addressable accounts) × ACV. Particularly relevant for B2B SaaS companies with subscription pricing models.