Whether you’re an established business or a startup, understanding that your target market goes beyond just the total number of possible customers is important.

Instead of looking at such a broad view of how many people want your brand’s products and services, it is far better to consider varying aspects of your unique niche and any untapped potential within certain segments of the market.

Taking time to do this right away can help you secure things like better funding, more investment opportunities, and a greater chance at long-term growth.

Ready to learn how TAM, SAM, and SOM can help you define the market size of your business? Let’s go.

Why Is It Important to Know the Size of Your Market?

So, why is knowing the size of your market so important?

It really comes down to understanding what possibilities are out there for your industry and whether there’s an actual need and/or want for the products and services your company provides.

Understanding your TAM, SAM, and SOM also helps potential investors see where in the overall market your brand fits, plus any potential for growth or challenges along the way.

While it is great to guess at where your brand fits in with competitors in terms of market share, by taking the time to calculate these figures, you can glean true insight into where your company fits into the overall marketplace.

And, finally, the size of your market is key to your overall growth. 

After all, if you know what the possibilities are for expansion to new markets or even within your existing regional area, then you can make better decisions.

How to Calculate TAM, SAM, and SOM?

The process of calculating TAM, SAM, and SOM is fairly easy — if you have a basic understanding of the various formulas involved.

Still, you’ll want to avoid just ballparking these numbers. For TAM, in particular, a lot of folks get tripped up by unreliable market reports or wishful thinking—numbers that look good in a pitch deck but don’t hold up when you’re actually trying to land a sale. Loop in third-party market data if you can, but also keep an eye on shifts in your industry’s landscape year to year. It’s not all static; something that seemed promising in 2022 may be totally different in 2025, especially if new tech or consumer behavior has shaken things up. A reality check with someone who’s seen it before doesn’t hurt, either.

Oh, and don’t ignore competitors when you’re sifting through these calculations. Not just the big names—the little regional or up-and-coming brands can poke holes in your expected share if you’re not careful. Sometimes, those unexpected players snag a chunk of your potential SAM or SOM simply because they get local preferences or pivot quickly when something in the market changes (which always happens, sometimes overnight). Pencil in a margin for surprises, even if it feels cautious. You’re not really helping yourself by painting a perfect, sunny picture no investor believes anyway.

TAM

To calculate TAM, multiple the total number of customers within the marketplace by the average sales figure. 

If you don’t know this information, you can use market research to guess based on published figures. 

Remember, TAM is the big picture number, which means it is supposed to be a large figure.

SAM

For calculating SAM, you’ll multiply the number of customers you’re able to service within your given area by the average customer value. 

This is a good way to see where your company fits in the given market with your specific business model.

SOM

Finally, the formula to calculate SOM is by multiplying last year’s market share by this year’s SAM. 

That should give you a more specific idea of what your approximate piece of the market in your area is — which then gives you the ability to find areas to make changes to operations, marketing, etc.

Wrap Up: Understanding Marketing Size with TAM, SAM, and SOM

Understanding these three concepts in terms of market size is a good way to show investors that your business has potential for growth, while also identifying areas where you might be able to make changes in the future. 

By keeping TAM, SAM, and SOM in mind, you can set the right goals and take more proactive steps towards growth.

Speaking of growth, did you know that smarketing is one of the best ways to ensure the success of your business and brand?

In our blog post, learn more about smarketing and how you can use it to fuel your business!

}}