Market Size Calculation (TAM, SAM, SOM)

Definition of Total Market (TAM), Servable (SAM) and Obtainable (SOM)

To make realistic financial projections, it is necessary to break down the market into three levels: TAM, SAM and SOM.

The Total Addressable Market (TAM) is the theoretical, global, pie-in-the-sky view that represents the total demand for a product worldwide or nationally, assuming zero competition. However, no company captures 100% of the market.

Therefore, it comes down to the Servable Available Market (SAM), which is the segment that truly fits the geography and business model of the product.

Finally, we arrive at the Servable Obtainable Market (SOM), which is the realistic portion that can be captured in the short to medium term, taking into account current resources, operational capacity and existing competition.

Realistic approach considering competition and operational constraints

Calculating SOM is an exercise in entrepreneurial humility. If we launch an eco-friendly sportswear brand, we must analyze how many direct competitors exist in that specific niche.

If there are five established brands, it is unrealistic to think that we will capture a majority market share immediately.

Perhaps, in the first year, only a small fraction of the SAM will be captured (e.g., one-tenth) because competitors have better SEO positioning, higher marketing budgets or an established reputation.

In addition, internal constraints, such as lack of staff, inferior web design or limited logistical capacity, further reduce the addressable market share.

SOM represents this pragmatic scenario, moving away from unattainable dreams to be based on competitive reality.

Importance of geographic location and purchasing power

When defining the SAM, rigorous demographic and geographic filters must be applied. It is not enough to know how many people buy sportswear; you must filter for those who have the income level to pay a premium price for green products and who reside in areas where the brand can ship.

Psychographic factors also play a role: are customers willing to wait longer shipping times for a sustainable product?

For example, a fine dining restaurant may have a citywide TAM, but its SAM is drastically reduced to people who live within a reasonable distance or who are willing to travel for a special occasion, excluding those seeking fast food in their own neighborhood.

This filtering avoids the fallacy of