Size the Prize Before You Play the Game

TAM tells you how big your opportunity is.
Your Total Addressable Market defines the maximum revenue potential for your product or service—assuming 100% market share. It’s a critical input for strategic decisions across product, fundraising, positioning, and go-to-market planning.

Why it's Important

Frames your business model’s growth potential and ceiling
Helps investors assess scalability and market timing
Informs product prioritization and target segment selection
Prevents overbuilding for a niche or overpromising in a saturated space
Aligns teams around a realistic vision of who you're building for and why

How to Implement

Choose a TAM approach—top-down (market reports), bottom-up (usage-based), or value-theory (problem-based).
Use credible sources like Gartner, IDC, PitchBook, or Statista for top-down sizing.
For bottom-up, estimate using pricing × potential customer base (e.g., $20/user/month × 1M users).
Segment by geography or vertical if you're not going global from day one—define TAM by initial target scope.
Validate assumptions with expert interviews, early user interviews, or real usage data.
Document your Serviceable Available Market (SAM) and Serviceable Obtainable Market (SOM) to show realism and focus.
Package it visually—investor decks and internal docs should include TAM charts with sources and assumptions clearly labeled.

How You Know You Got It Right

You can defend your math with clear assumptions
Investors don’t poke holes in your logic during pitch reviews
It’s not just a vanity number—it aligns with your actual GTM focus
Your SAM and SOM demonstrate traction and near-term focus
The team uses TAM to guide product and segment decisions
You’re prepared to adjust it as new data or use cases emerge

Real-World Examples

Airbnb

Initially pegged TAM around budget travel, but reframed it by showing the global short-term rental opportunity was billions larger.

Calendly

Calculated TAM based on professionals booking external meetings, then grew it by adding adjacent use cases.

Shopify

Focused early on SMB ecommerce sellers, then expanded its TAM story as it moved upmarket and into payments/logistics.

Make It Better

Use both top-down and bottom-up to triangulate
Build a live spreadsheet to tweak assumptions over time
Tailor your TAM story to different audiences (investors vs. internal teams)
Break out TAM by segments to support ICP and GTM plans
Update annually or as product scope expands

Don't Make These Mistakes

Using vague or outdated sources with no methodology
Presenting a global number when you only operate in 1–2 markets
Confusing TAM with your immediate opportunity (SAM/SOM matter too)
Relying on one-size-fits-all math—investors can smell laziness
Treating TAM as a one-time slide instead of a strategic tool