Annual Planning Part 5: Total Addressable Market
How large is the market that you’re going after? What do you signal to investors? What motivates your leadership team to go all in with this business as opposed to any other? When you trade time for money you really one have one option. Time after all is the most limited resource we work with.
So today let’s talk about Total Addressable Market and how to approach it.
When thinking about market sizing, three acronyms come up time and time again: TAM, SAM, and SOM. They’re more than just jargon — they help us get a grip on the real opportunities ahead. Let’s break them down.
TAM (Total Addressable Market): Think of TAM as the total pie — the entire revenue potential if your product captured 100% of the market, with no competition. It’s the biggest number, and while it might be aspirational, it's still critical to know.
SAM (Serviceable Available Market): SAM is where things get more practical. It’s a slice of TAM — the part of the market that aligns with your product or service's target audience, geography, and capabilities. You’re starting to get more realistic here.
SOM (Serviceable Obtainable Market): Finally, SOM is the portion of SAM that you can realistically capture given your current resources, market penetration, and the competitive landscape. It’s your near-term goal and the number you’ll build your strategy around.
Understanding these three metrics isn’t just a checkbox — it’s how you start making smarter bets on where to invest and where to focus.
Let’s look at two examples from my Sales Ops Masterclass.
This image illustrates the breakdown of Uber’s market opportunity using the concepts of TAM (Total Addressable Market), SAM (Serviceable Available Market), and SOM (Serviceable Obtainable Market).
TAM (Total Addressable Market): Representing the outermost circle, Uber's TAM is estimated at $5.7 trillion. This figure represents the entire global transportation market, essentially the maximum theoretical revenue Uber could generate if it provided 100% of the world's transportation services.
SAM (Serviceable Available Market): Moving inward, the next circle represents Uber’s SAM, which is $4.2 billion. This is a narrower slice of the market focused on U.S. taxis and limousine services, indicating the segment of the transportation market that Uber can actually target based on its geographic and service scope.
SOM (Serviceable Obtainable Market): The innermost section, representing $1 billion, is Uber’s SOM. This is the portion of the SAM that Uber can realistically capture, focusing on 5% of the top five U.S. cities. This considers Uber’s ability to compete, penetrate the market, and capitalize on its available resources and presence.
The visual emphasizes how TAM provides the broadest view of market opportunity, but as factors like service scope and competition are considered, the realistically obtainable market shrinks down to the SOM, which is the most actionable figure. In Uber’s case, this SOM is where the company can realistically target and grow its business.
But where is Uber now?
This is how Uber presented themselves initially. But my oh my how far they have come since then. The image is not an accurate representation of where Uber stands today as a business. It reflects a much earlier stage in Uber’s lifecycle, likely around its initial expansion into the U.S. transportation market, especially when it was primarily focused on ride-hailing in major cities. Let me explain:
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