How to Size Your Addressable Market (TAM, SAM, SOM, top-down vs. bottom-up)

Raising capital for your startup requires you to fully understand the size of your market. This video simplifies this process as you start building (and fundraising). Let's go!
FREE TEMPLATES:
-Total Address Market Spreadsheet:
docs.google.com/spreadsheets/...
-Google Slide (Market Sizing) for Investor Deck:
docs.google.com/presentation/...
TIMESTAMPS
0:00 Intro
0:59 What is TAM?
1:19 What is SAM?
1:32 What is SOM?
1:42 Top-down vs bottom-up
2:43 Intro to template
3:23 TAM, SAM, SOM deep-dive
6:29 Investor deck template for the market size
7:52 Conclusion
DEFINITIONS:
TAM = Total Addressable Market is the total market for your product. So if everyone in the world could buy your product, equaling 100% of the market, regardless of the competition in the market.
SAM = Serviceable Available Market is the portion of the market that you can acquire based on a current business model you are adopting.
SOM = Serviceable Obtainable Market is the subset of your SAM that you will realistically get to use your product. This is effectively your target market that you will initially try to sell to.
IMPORTANT TAKEAWAY
Use a bottom-up approach when leveraging TAM, SAM, and SOM.

[@fajarzain131]

Thankyou! This video is really help me to grow my business, keep up the good work! 😎

[@marcojosezgimenez]

Yoooo thanks for the detailed explanation and the template! Much appreciated

[@juliushaas_]

Thanks JR, love your energy!

[@walterrodriguez9550]

than you for taking the time to break this down!

[@kashsingh4623]

Thank you! It's a very helpful video 🙏

[@sri4132]

Hi JR…this is awesome and selfless help to all those budding entrepreneurs. Appreciate your efforts🙏🏻

[@JRSantosdiaz]

Really appreciate the kind words Sri, means a lot.

[@michaelcarney5535]

This is great and super helpful! Thanks JR!

[@JRSantosdiaz]

Thanks Carney! Glad to hear you found it helpful, really appreciate the support.

[@ajay0nz]

Really well explained! Fantastic video!

[@JRSantosdiaz]

Thanks! Really appreciate it! :)

[@ramisrunning]

Thanks for all the help man!!!

[@JRSantosdiaz]

Thanks! Really appreciate it! :)

[@BlackManTravels]

Awesome!!!! Thank you so much

[@acnice_]

I love this! ❤❤

[@estilariach1694]

Great video Thanks alot

[@kennedykingkenfx8348]

Great Video! Straight forward and very descriptive! Looking forward to seeing more videos!! Can you do a video on validating the idea of your start up when creating a MVP And also a video on how to bootstrap; what to focus on and what not to focus on when lunching your business 👌

[@JRSantosdiaz]

Really appreciate it! And thank you for your suggestion :)

[@kimiakebriti3996]

very helpful

[@batoolhijjawi3114]

Amazing Video, Thanks for your great efforts. I hoped you explained more about the numbers itself. (Total number of customers and annual customers revenue. ) How to get the data and statistics that will help me calculating these numbers ?

[@pedroSilesia]

I've done bottom up in the past and from my experience, I totally agree with your statements in this video. Simple concept, simply explained, well done. Out of interest do you use any providers or platform selling data on companies?

[@aninatroya6875]

This is very helpful, thank you! How did you estimate the Total Number of Customers and the Annual Market Revenue?

[@user-uk7vx6xx8d]

Thank you sir, can you recommend me the book about this topic?? I want to study tam-sam-som approach specific more

[@michyonyourmind]

👏🏼👏🏼👏🏼

[@JRSantosdiaz]

😊😊😊

[@JRSantosdiaz]

Really appreciate the support!

[@isabellasophievonmaltzanpa4813]

Great video! But I would like to know how you estimate the number of clients and the customer revenue! Any tips?

[@JRSantosdiaz]

Thanks! Great suggestion, will add this as an idea for a future video so would love to help

[@mjtoofly3185]

Hey! Where can I find the data to determine my market size?

[@tubeidan]

Hey JR, great video! A question please: In your example, you have 2 "types" of business: Enterprise and SMB. Is that assuming they are both in the same sector? (for example, Hospitality?) or not necessarily? As a big vision, we'd like to target multiple sectors with our product.

[@JRSantosdiaz]

Hey Idan! Appreciate the support. Happy to answer your question. In the example, I wanted to reference enterprise (Fortune 500 companies) and SMBs (small and medium sized businesses). This can be across all sectors. For TAM, you want to make sure you address the entire pie, so in your case, you'll want to make sure you include all sectors (hospitality, etc) regardless of size. Let me know if you need more help here - happy to dig deeper!

[@tubeidan]

@@JRSantosdiaz Thanks for answering so quickly. You are making me smarter with every word you write/say :) Have a wonderful day!

[@tubeidan]

@JR Santosdiaz Oh!, and one more quick questions please: For my best understanding, VCs are expecting to hear at least $1B in the TAM. But... what are the minimum number they are expecting to hear in regarding to the SAM and SOM? (Thanks again!)

[@JRSantosdiaz]

@@tubeidan - generally speaking VCs want to >100X their return for seed investments. That said, I don't think there are magic numbers for SAM/SOM as long as you can justify how you'll eventually expand and maximize more of the TAM. You are correct though, TAM should always be >$1B. Hope that's helpful!

[@JRSantosdiaz]

Let me know if you have any other questions!

[@alainlee2159]

I have a question what would be my tamsamsom for an inventory system for a company ? thank you

[@charliesink7371]

Great video JR Santosdiaz, this helped a lot with our own company. We will grant you $10,000 dollars when we make our first $1,000,000 dollars. Go Broncos.

[@JRSantosdiaz]

Glad to hear you found the video useful. Ha, excited for that $10K ;)