Market Research
TAM, SAM and SOM: Sizing a Market You Can Actually Reach
Market sizing is not a vanity exercise. Done honestly, it tells you whether your revenue plan is ambitious or arithmetically impossible.
Three layers of a market
TAM is the total demand for the category. SAM is the portion your model, geography and channel can serve. SOM is the share you can realistically capture in your planning horizon.
Build it from the bottom up
Top-down sizing ("the category is worth ₹40,000 crore, we only need 1%") convinces nobody. Bottom-up sizing does: number of reachable customers × purchase frequency × average value. The result is smaller, defensible and directly connected to your sales plan.
Label your assumptions
Every market number in an early-stage plan is an assumption. Stating it as one is a sign of rigour, not weakness. Record the source, the date and the logic beside each figure.
Sanity checks
- Does SOM imply a sales capacity you can actually staff?
- Does your pricing survive at SOM volumes?
- Would your break-even point be crossed well before SOM is reached?