Total Addressable Market (TAM)
The total revenue opportunity if your product captured 100% of the market.
Definition
TAM represents the maximum revenue potential for a product or service. It's typically calculated top-down (from industry reports) or bottom-up (number of potential customers × average revenue per customer). TAM is often paired with SAM (serviceable addressable market) and SOM (serviceable obtainable market) to show realistic market capture.
Why it matters for founders
Investors use TAM to evaluate whether your market is big enough to build a venture-scale business. A $50M TAM is too small for VC-backed companies. Understanding your TAM also helps you prioritize which segments to pursue first.
Example
A SaaS tool for dentists: 200,000 dental practices in the US × $500/month = $1.2B annual TAM. SAM (practices with 5+ employees) = $600M. SOM (reachable in 3 years) = $60M.
How Foundra helps
Foundra helps you estimate TAM during the Spark phase. The AI workspace challenges your market sizing assumptions and generates an Idea Snapshot that includes market context.
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Related terms
Serviceable Addressable Market (SAM)
The portion of TAM you can realistically serve with your current product and business model.
Serviceable Obtainable Market (SOM)
The portion of SAM you can realistically capture in the near term.
Unit Economics
The revenue and costs associated with a single unit of your business (usually one customer).
Customer Acquisition Cost (CAC)
The total cost to acquire one new customer.