What are TAM, SAM, and SOM? A Guide for Sales Reps and Marketers

You've got pipeline goals to hit and territories to plan — but how big is your actual market opportunity? Understanding TAM, SAM, and SOM isn't just about impressing investors with big numbers. It's about making smarter decisions about where to focus your sales efforts and which accounts to prioritize.

For sales reps and marketers, these three metrics are your roadmap to realistic goal-setting and strategic resource allocation. They help you answer critical questions: Which markets should we enter? What's a reasonable quota? How much pipeline can we realistically build?

We'll break down exactly what each metric means, show you how to calculate them with real numbers, and — most importantly — explain how to use these insights to accelerate your sales strategy.

What are TAM, SAM, and SOM?

TAM, SAM, and SOM are acronyms used in marketing to help guide how a company develops and implements its sales strategy. TAM stands for Total Addressable Market, SAM stands for Serviceable Addressable Market, and SOM stands for Serviceable Obtainable Market.

Here’s a closer look at each.

TAM

Total addressable market, or TAM, is the total number of potential customers that exist for a product or service. This number is usually estimated using precise demographic data that is collected from a variety of sources.

For example, a company that sells organic fruits and vegetables may conduct market research to determine their TAM. They would look at the population size of an area, the local preferences for produce, and the overall spend in the relevant category. After considering those factors, they would have an estimate of the total addressable market - the number of potential customers they could potentially reach.

SAM

Serviceable available market, or SAM, is the number of potential customers who are reachable through marketing or sales efforts. In other words, knowing your SAM lets you know how many customers you can acquire depending on how your business model is structured.

There are many factors to consider when calculating SAM, such as geography, buying power, and products or services offered.

For example, a business that sells technology products may want to target a certain segment of the addressable market that consists of large corporations and businesses. They would have to consider factors such as the size of their sales team, the types of products they are selling, and the regions they operate in.

After considering those factors, the company could have an estimate of the SAM – the number of potential customers they can realistically reach with their current resources.

SOM

Serviceable Obtainable Market, or SOM, is the number of potential customers who can be realistically sold to. This number takes into account factors such as sales cycle, budget, and competition. For example, if a company has limited resources, SOM would be lower than SAM.

Why TAM SAM SOM matters for sales and marketing teams

TAM, SAM, and SOM are important metrics to consider if you want to create and execute an effective sales strategy. As calculations, they provide a realistic and data-driven picture of a company’s potential market size.

Companies use these metrics to make more informed decisions about their products and services, where to allocate resources, and how to focus their sales efforts. Plus, these metrics can also be used to identify target markets, set objectives and goals, and track sales performance over time.

Additionally, if you’re a startup entrepreneur, potential investors want to know your TAM SAM SOM as a good way to gauge success, valuation, the weight of your value proposition, as well as how much risk they’re willing to take on. Entering a new business that presents a revenue opportunity requires creating a business plan with more than just a business idea.

How to calculate TAM SAM SOM

Say you’re an entrepreneur diving into new markets and you need to find out your business idea’s market potential. Keep these calculations in your back pocket as general templates you can use for market analysis.

How to calculate TAM

To calculate the total portion of the market, your TAM, you simply multiply the number of potential customers by their potential customer spend (sometimes known as total contract value).

The formula looks like this:

TAM = (Potential Customers) x (Potential Customer Spend)

How to calculate SAM

SAM allows you to determine the maximum potential revenue and profitability a company can generate in a market. It takes into account the overall potential a market has and then adjusts the size to reflect the impact of market share and market growth.

To find your SAM, multiply the number of customers by the average annual revenue you’d get from them.

The formula looks like this:

SAM = (Number of Potential Customers) x (Their Average Annual Revenue)

How to calculate SOM

SOM is the final number you’ll arrive at after taking into account factors like budget, competitors, customer preferences, and sales cycle. This is the number you can realistically expect to acquire or sell to as a company.

To find your SOM, multiply last year’s market share numbers with this years SAM.

Here’s the formula:

SOM = (Last Year’s Market Share) x (This Year’s SAM)

TAM SAM SOM examples with real numbers

TAM example

Let’s say you’re a B2B SaaS company that sells project management software. Your TAM is every business globally that could use your tool. If there are 10 million such companies and your average annual contract value (ACV) is $5,000, your TAM is a whopping $50 billion. It’s the big picture.

SAM example

Now, let’s get real. Your software is currently only available in English, and you specifically target tech companies with 50-500 employees. This narrows your market to, say, 500,000 companies. That’s your SAM — a $2.5 billion market you can actually serve right now.

SOM example

Finally, what can you realistically capture this year? Considering your current sales team, marketing budget, and the handful of competitors you’re up against, you might aim to capture 1% of your SAM. That’s your SOM — a tangible $25 million target for the year.

Using B2B data to accurately calculate TAM, SAM, and SOM

By using a B2B contact and intelligence platform like Apollo.io, sales and marketing teams can easily access accurate and up-to-date data to accurately calculate for TAM, SAM, and SOM. Apollo.io provides access to a vast database of contacts and companies, enabling sales and marketing teams to segment their target market precisely and track their results in real-time.

Apollo not only provides detailed contact and company data, but also access to web-based profiles and email signatures to enable teams to identify decision-makers, budget holders, and other vital roles in the buying process.

This allows teams to accurately calculate for TAM, SAM, and SOM, as it takes into account who is making the buying decisions, who holds spending power. Apollo’s enriched contact intelligence and analytics also provide teams with a deeper understanding of their target audiences.

Advanced search capabilities and filtering allow teams to easily hone in on their target market, enabling more accurate TAM, SAM, and SOM calculations with greater precision and efficiency.

In addition, sales and marketing teams can use Apollo.io’s insights and analytics to develop effective sales and marketing strategies. Teams can understand the customer journey, the impact of their campaigns, and the performance of their outreach efforts, providing them with the data-driven insights necessary to optimize TAM, SAM, and SOM calculations.

Applying TAM SAM SOM to your go-to-market strategy

Knowing your numbers is one thing; using them is another. This framework isn't just for investor pitches — it's a practical tool for your entire GTM motion.

This is where solutions like Apollo.io come in.

With data-driven insights like customer intelligence, account scoring, and segmentation, they help you discover the best target accounts, map out the decision-makers, track conversations and analyze conversations to understand the context behind what buyers are saying. Your SAM helps you define your ideal customer profile (ICP) and focus your marketing campaigns on the segments you can actually win. And your TAM? That's your north star for long-term growth, showing you where you could expand next.

Turn market sizing into pipeline growth

TAM, SAM, and SOM are more than just acronyms; they're a strategic compass for your business. They help you set realistic goals, allocate resources wisely, and tell a compelling story about your potential.

But a compass is useless without a map. To turn these market estimates into real pipeline, you need to find and engage the right accounts within your SOM. That's where a sales intelligence platform makes all the difference, providing the accurate data needed to put your strategy into action. Get started with Apollo to connect your market potential to real-world results.

Frequently asked questions about TAM SAM SOM

Is SAM typically 10% of TAM?

There's no universal percentage. It varies wildly based on your business model, geographical limitations, and target segment. For some niche businesses, SAM might be a large portion of TAM. For others with broad potential but specific constraints, it could be 1% or even less. The key is to be realistic about who you can currently serve.

What's the difference between PAM and TAM?

PAM, or Potential Addressable Market, is an even bigger-picture view than TAM. It represents every person or company that could conceivably use a solution like yours in the future, even if the market doesn't fully exist yet. TAM, on the other hand, is the total market for your specific product or service as it exists today.

How often should you recalculate TAM SAM SOM?

It's a good practice to review your TAM, SAM, and SOM at least annually or whenever there's a significant change in your business. This could include launching a new product, expanding into a new geographic region, or a major shift in the competitive landscape. Think of it as a living document, not a one-and-done exercise.