Stop 02 · Product Strategy & VisionTopics · 9/11

Market Sizing (TAM / SAM / SOM)

In short

Investors and leaders will ask "how big can this get?" TAM, SAM and SOM give a quick, honest answer, from the whole market down to what you can actually win.

TAM is the total addressable market, SAM is the segment you can realistically serve, and SOM is what you can realistically capture — used to sanity-check whether an opportunity is worth pursuing.

The purple blob holds a big tub of dosa batter in front of rings of small houses.

Think of it like this

Selling dosa batter

Everyone in your city who eats dosa is the total market. Those in your neighbourhood who buy ready batter is what you can serve. The few hundred homes your scooter can reach each morning is what you'll realistically get.

Watch it happen

Narrowing down a market

TAM

SAM

SOM

1/4TAM, Total Addressable Market: everyone who could ever use this kind of product, if you had no limits.

The big ideas

What you need to know

Bottom-up beats top-down

Count real buyers times what they'd pay. It's more believable than taking 1% of a giant report number.

Show your maths

Write each assumption in its own cell, so anyone can challenge or change it.

It's an estimate

Market sizes are rough. Being roughly right with clear reasoning beats being precisely wrong.

See it in code

A tiny example

excel

1B2: 50000      (hostel students in your city)2B3: 0.30       (share who'd use a laundry app)3B4: 1200       (rupees each spends per year)4B5: =B2 * B3 * B4

A bottom-up SAM in Google Sheets. Each assumption sits in its own cell, so changing one updates the total. The numbers here are made up for practice.

Save yourself the pain

Common mistakes

Oops

Saying "India has 140 crore people, if we get 1%…".

Do this instead

Start from the specific users you can reach and what they'd really pay. Build up, not down.

Oops

Treating TAM as your revenue forecast.

Do this instead

TAM is the ceiling for the whole category. Your plan should rest on SOM.

Your mission

Size a market bottom-up

~30 min

Quick check

Which is your SOM?

Go deeper

1Estimate TAM/SAM/SOM for a product idea using a top-down and a bottom-up approach.
2Compare your two estimates — big gaps usually mean a flawed assumption somewhere.
3Practice this out loud — it's a very common interview exercise (see Phase 15).