How to size your market: TAM, SAM and SOM explained

Investors look at market size to understand how big your startup can become. A large market alone is not enough, but a small one is usually not a fit for venture capital. Sizing it correctly and credibly makes your deck more trustworthy.

Three concepts

• TAM (total addressable market): total spending on the problem you solve, worldwide or in your target region
• SAM (serviceable available market): the part you can actually reach with your model, geography and product
• SOM (serviceable obtainable market): the share you can realistically win in the next few years

Top-down

Start from an industry report figure and narrow it with percentages. Fast, but often seen as optimistic and shallow. "If we get 1 percent of the market" does not convince investors.

Bottom-up

Multiply the number of target customers by annual revenue per customer. More convincing because it rests on your model.

Example: a startup selling inventory software to restaurants.

• Restaurants in the target segment in Türkiye: X
• Share suited to the software: Y
• Annual subscription per restaurant: Z
• SAM = X × Y × Z
• SOM = SAM × the realistic share reachable in five years (based on sales capacity)

Source each assumption.

Data sources

• Official statistics (TurkStat, ministries)
• Industry association and chamber reports
• Annual reports of listed companies
• Your own interviews and sales data; see our customer interview guide

In the deck

• Show TAM, SAM and SOM on one slide as nested circles.
• Briefly state the method and key assumptions.
• Add market growth and the trend behind you.
• If you plan to expand abroad, show it as a separate layer; see our international expansion guide.

Common mistakes

• Defining TAM too broadly ("the global e-commerce market")
• Using unsourced figures
• Not linking SOM to sales capacity

Conclusion

Good market sizing shows sound logic more than a big number. Reflect it consistently in your business plan and pitch deck.