Total addressable market (TAM)
The total revenue a product could earn if it reached every customer who could use it.
What it means
TAM is the outer boundary of an opportunity. It is usually estimated in one of two ways. A top-down estimate starts from a large industry figure and narrows it. A bottom-up estimate counts potential customers and multiplies by an average spend. Both methods depend on assumptions, which should be written down next to the number.
Teams often use TAM to decide whether a market is worth entering, and investors often ask for it in pitches. Inflated TAM figures are common, especially when the definition is loose. Pair TAM with a serviceable available market (SAM) and an obtainable share (SOM), which narrow the scope to what a product can realistically reach in practice. Check the source report for the definition it used. A number without its definition is hard to defend in front of a board.
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Cite this entry
https://marketintelligenceplatform.com/glossary/tam/