TAM, SAM and SOM

Also called Total addressable market, Market sizing

Three nested estimates of how big the opportunity is. Frequently invented, and investors know it.

What it means

Total addressable market is the total spend on this problem if you could serve everyone. Serviceable addressable market is the part you could reach given your model and geography. Serviceable obtainable market is the part you could realistically win.

The three should narrow sharply.

Why it matters

Investors use it to judge whether the business could ever be large enough to matter to them. Founders use it to check the same thing for themselves, which is the more useful purpose.

A market too small to support the business you want is worth knowing about before you build it.

What it looks like in practice

Build it bottom-up: number of potential customers, multiplied by realistic annual spend. Show the working.

Top-down figures taken from an industry report are the ones that get dismissed, because everybody has seen "1% of a £10bn market" and knows it means nothing.

State the assumptions explicitly. An investor will test them, and defensible assumptions matter more than a large answer.

What to watch out for

Defining the market so broadly that it includes people who would never buy from you.

Confusing market size with demand. A large market with entrenched suppliers and no switching is not an opportunity.

Where to get proper advice

Trade associations, the ONS and sector regulators publish usable data free. Paid market reports are often less useful than a bottom-up count.