What is total addressable market (TAM)?
Total addressable market (TAM) is the total revenue available if a company won every potential customer in its market. It is usually stated as annual revenue. Two narrower figures sit inside it. Serviceable available market (SAM) is the part the company's offer can serve. Serviceable obtainable market (SOM) is the part it can realistically win.
Why it matters to a revenue leader
TAM sets the ceiling on a growth story. Investors and sponsors use it to judge whether a plan has room to run, and a revenue leader uses the narrower figures to set territories and targets. In local commercial services, the real market is bounded by geography and licensing. A fire protection branch can only serve buildings its technicians can reach and its licenses cover.
How to calculate it
Bottom-up: number of potential customers in the market times expected annual revenue per customer. Top-down: start from an industry revenue figure and narrow it by segment and geography. A common mistake is presenting TAM as the target, when the plan should rest on the obtainable share.
Example
Fictitious numbersA backflow testing company estimates 60,000 commercial properties in its state that need annual testing, at an average of $350 a year, for a TAM of $21M. Its branches reach 24,000 of those properties, a serviceable market of $8.4M. With current technician capacity it can win about 6,000, or roughly $2.1M a year.
"Is our growth plan built on the whole market or on the share our branches can reach and serve?"
Sources
- Total Addressable Market (TAM) (Corporate Finance Institute) checked 9 Oct 2026