Most guides stop at three circles and a revenue number. For a B2B team that number is only useful if it ends as a list of named companies to contact this quarter. This page gives the definitions and a worked example that goes one step past SOM.
What do TAM, SAM and SOM mean?
The three terms are concentric circles, each one a subset of the one before. The UC Irvine Libraries entrepreneurship guide draws them exactly that way.
- TAM, total addressable market: total demand for the product if every possible customer bought it. In B2B, the number of companies that could use it, multiplied by what one of them would pay per year.
- SAM, serviceable addressable market: the part of TAM that fits your product, language, region and sales model today.
- SOM, serviceable obtainable market: the part of SAM you can realistically win, given competition, sales capacity and win rate.
All three are usually expressed in money. In B2B the more useful unit is the count of companies, because companies end up in a list.
Top-down or bottom-up: which to use?
Use bottom-up whenever you can count the customers. Top-down starts with an industry report ("the CRM market is worth X billion") and takes a percentage of it. Bottom-up starts with the number of companies that meet your criteria and multiplies by what each would pay.
Top-down is fast and almost always too big, and nobody can check how 2% of a global market became your number. Bottom-up is slower, but every step can be checked. For B2B, the UC Irvine guide recommends exactly this: count the businesses that fit your criteria. Bill Aulet's Disciplined Entrepreneurship sizes the first, beachhead market the same way.
How do you turn SOM into a list you can write to?
Add a fourth step: the list. SOM says how much of the market you can win. The list says which companies you will contact first, and its size is set by your outreach capacity, not by the market.
A worked example for a B2B software product sold to software companies with 50 to 500 employees. Every number is illustrative except the sending capacity.
| Step | Criteria | Companies | Value at €12,000 a year |
|---|---|---|---|
| TAM | Software companies in Europe, 50 to 500 employees | 40,000 | €480M |
| SAM | Same, in Germany, Austria and Switzerland (DACH), where you sell in German | 6,000 | €72M |
| SOM | SAM won at a 2% win rate within 12 months | 120 | €1.44M |
| List | Companies contacted this quarter, set by capacity | 1,500 | Not a market size |
Illustrative figures. The sending capacity behind the List row is a worked example from the Leadspicker knowledge base.
The list row comes from capacity. A setup of 10 domains, 30 mailboxes and 5 emails per mailbox per day sends roughly 3,000 emails a month. With three emails per contact and two contacts per company, that reaches 500 companies a month, or 1,500 a quarter. If SAM holds 6,000 companies, the first list should be the 1,500 that fit best, not a random quarter of them.
Filters on firmographic data give the count. Lookalike modeling ranks it by similarity to your existing customers, so the first 1,500 are the closest matches.
Bill Aulet's Disciplined Entrepreneurship (2nd ed., 2024) sizes the beachhead market's TAM in step 4 and the follow-on markets in step 14. The UC Irvine guide and Sequoia Capital both favour counted customers over headline numbers.
What do investors look for in a market slide?
Detail they can check. Sequoia Capital's guide to presenting to investors asks for the market as a calculation: the number of customers, how fast the market grows, and the value of each customer. It warns against large numbers lifted from market studies without that detail.
- Show the arithmetic: companies times annual value, with the source of each count.
- Make SAM explicit: name the criteria that cut TAM down, such as region, size and language.
- Tie SOM to capacity: sales headcount, outreach volume and win rate explain why SOM is that size.
How do TAM and ICP relate?
The ideal customer profile (ICP) is the filter that turns TAM into SAM and SOM. TAM counts everyone who could buy. The ICP describes the companies that buy fastest, pay most and stay longest. Every criterion you add shrinks the circle and raises the share you can win.
This is why the bottom-up method and the ICP are the same work. Write the ICP as criteria you can filter on, count the companies that meet them, and the count is your SAM. Rank them by fit and capacity, and the top of the ranking is your first list.
Frequently asked questions
What is the difference between TAM, SAM and SOM?
TAM is everyone who could buy the product. SAM is the part your product and channels can serve today. SOM is the share of SAM you can realistically win in the next one to three years.
Should I calculate market size top-down or bottom-up?
Bottom-up, whenever you can count the customers. Count the companies that meet your criteria and multiply by what each pays. Top-down shares of analyst reports are hard to defend.
How do I turn SOM into an outreach list?
Filter companies by your ICP criteria to get a count, rank them by similarity to existing customers, and cut the ranking to what your outreach capacity can reach in a quarter. That cut is your first list.
