TAM/SAM/SOM in 60 Minutes

TL;DR: Skip the $1T slides. Real TAM/SAM/SOM takes 60 minutes, uses actual data, and focuses on what you can realistically capture.

Investors see through inflated market sizes. Show them reachable numbers instead.

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Why Most TAM Slides Are Fiction

The problem: "Our TAM is $100B because everyone uses software" The reality: Your addressable market is who you can actually reach and serve

Red flags investors hate:

• Top-down market sizing from research reports
• "If we capture just 1% of this massive market..."
• Markets that include everyone on Earth
• No path from SOM to SAM to TAM

What works: Bottom-up sizing based on real customer segments, distribution channels, and unit economics.

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The 60-Minute Framework

20 minutes: Define your actual customer 20 minutes: Calculate bottom-up market size
20 minutes: Map your path to growth

Tools you need:

• Google Sheets
• Industry research (free sources)
• Competitor pricing pages
• Your actual customer conversations

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Step 1: Define Your Real Customer (20 min)

Start specific, not broad:

❌ BAD: "Small businesses that need project management" ✅ GOOD: "Design agencies with 5-20 employees who manage 10+ client projects monthly"

The 5-layer customer definition:

1. Industry/vertical: Design agencies, not "creative businesses"
2. Size: 5-20 employees, not "small businesses"
3. Behavior: Manage 10+ projects monthly, not "do project management"
4. Pain point: Client communication chaos, not "need organization"
5. Budget authority: Agency owners who spend $100-500/month on tools

Validation check: Can you name 20 companies that fit this exact description?

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Step 2: Bottom-Up Market Calculation (20 min)

SOM (Serviceable Obtainable Market)

What you can realistically capture in 3 years

Formula: (Target customers you can reach) × (Average revenue per customer) × (Market penetration %)

Example: Design Agency PM Tool

• Design agencies (5-20 employees) in English-speaking markets: ~12,000
• Agencies you can reach through your channels (content, partnerships, ads): ~2,400 (20%)
• Realistic conversion rate in 3 years: 2.5% = 60 customers
• Average revenue per customer: $200/month × 12 = $2,400/year
• SOM = 60 × $2,400 = $144K ARR

SAM (Serviceable Addressable Market)

Everyone you could serve if you had unlimited reach

Same customer definition, broader geography/reach:

• All design agencies (5-20 employees) globally: ~35,000
• Average revenue per customer: $2,400/year
• SAM = 35,000 × $2,400 = $84M

TAM (Total Addressable Market)

Maximum market if you solved adjacent problems

Expand the customer definition logically:

• All creative agencies (design + marketing + advertising): ~150,000
• All project-based service businesses: ~500,000
• Average revenue per customer: $2,400/year
• TAM = 500,000 × $2,400 = $1.2B

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Step 3: Growth Path Mapping (20 min)

Map how you move from SOM → SAM → TAM:

Year 1: Prove SOM

• Target: 20 design agency customers
• Channels: Content marketing, design community partnerships
• Revenue: $48K ARR

Year 2-3: Expand within SAM

• Geographic expansion: UK, Australia, Canada
• Channel expansion: Partner integrations, affiliate program
• Revenue: $500K ARR

Year 4-5: Move toward TAM

• Adjacent markets: Marketing agencies, advertising agencies
• Product expansion: Add features for non-design workflows
• Revenue: $5M ARR

Credibility check: Does each step follow logically from the previous one?

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Common Mistakes (and fixes)

Mistake 1: "1% of a huge market"

Problem: "If we get 1% of the $50B project management market..." Fix: Start with 10% of a small, specific market you can dominate

Mistake 2: Top-down TAM

Problem: Using Gartner reports for markets that don't match your product Fix: Build TAM from your actual customer unit economics

Mistake 3: No path between SOM/SAM/TAM

Problem: Huge jumps with no explanation of how you bridge them Fix: Show logical expansion steps with realistic timelines

Mistake 4: Fictional customer behavior

Problem: "People will pay $100/month for this" with no evidence Fix: Base pricing on what similar customers pay for similar solutions

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Data Sources (All Free)

Customer counting:

• LinkedIn Sales Navigator (company counts by criteria)
• Industry association directories
• Government business registries
• Competitor customer lists/case studies

Pricing research:

• Competitor pricing pages
• G2/Capterra reviews mentioning pricing
• Your customer interviews
• Similar tool pricing in adjacent markets

Market validation:

• Google Keyword Planner (search volume for problem-related terms)
• Social media groups (how many people discuss this problem)
• Existing solution reviews (complaints that indicate market gaps)

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The Investor Reality Check

Questions your TAM/SAM/SOM should answer:

1. "Who exactly are your customers?" Specific enough that I could find them on LinkedIn

2. "How did you calculate this?" Bottom-up from real customer units and behaviors

3. "How will you reach them?" Specific channels and expansion plan

4. "What evidence supports these assumptions?" Customer interviews, competitor analysis, pilot data

5. "What does success look like in 3 years?" Clear path from current state to SOM capture

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Template: 60-Minute Market Sizing

Customer Definition (20 min)

Industry: [specific vertical]
Size: [employee count/revenue range]
Location: [geographic constraints]
Behavior: [specific pain point/workflow]
Budget: [what they spend on similar tools]
Count: [how many exist]

Market Calculation (20 min)

SOM = [customers you can reach] × [ARPU] × [penetration rate]
SAM = [total addressable customers] × [ARPU]
TAM = [expanded market definition] × [ARPU]

Growth Path (20 min)

Year 1: [specific channel] → [customer count] → [revenue]
Year 2-3: [expansion method] → [customer count] → [revenue]
Year 4-5: [adjacent markets] → [customer count] → [revenue]

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FAQ

Q: What if my TAM looks small compared to others? A: Better to dominate a small market than get lost in a big one. Investors prefer realistic numbers.

Q: How accurate do these numbers need to be? A: Directionally correct with documented assumptions. Show your work, not perfect precision.

Q: What if I can't find data for my market? A: That might indicate the market is too new or too small. Consider adjacent markets or wait for more data.

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Ready to size your market properly?

We help founders build credible market sizing that investors actually believe. No fiction, just facts.

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Internal links:

• Competitor Teardowns
• Niches Outside SV
• Go/No-Go: 3 Questions
• The One-Idea Rule
• The Anti-Graveyard Roadmap