Before launching a new product or starting a business, you need to know the size of your potential market. It's like fishing: you want to know if you're casting your line into a small pond or a vast ocean. Sizing your market helps you understand your potential for growth, attract investors, and create a focused strategy.

To do this, businesses use a simple framework with three key concepts: TAM, SAM, and SOM. Let's break them down.

Imagine you're opening a high-end hot dog stand. Your Total Addressable Market (TAM) is the total amount of money spent on hot dogs across the entire globe each year. It's a huge, theoretical number that shows the overall appetite for what you're selling.

You can't sell hot dogs to everyone in the world from a single stand. Your Serviceable Available Market (SAM) is the portion of the market you can actually serve. For your hot dog stand in Chicago, your SAM might be the total money spent on hot dogs in the Chicago metro area. It's the part of the ocean your boat can actually reach.

Even in Chicago, you won't be the only hot dog vendor. Your Serviceable Obtainable Market (SOM), sometimes called your Share of Market, is the slice of your SAM you can realistically win. Given your location, marketing budget, and the local competition, maybe you can capture 1% of Chicago's hot dog market in your first year. That’s your SOM. It’s your target for right now.

Thinking through TAM, SAM, and SOM forces you to be realistic. It helps you build a solid business plan, set achievable goals, and explain your vision to potential investors. It's the foundation for a smart go-to-market strategy, turning a vague idea into a concrete plan of attack.

Now, let's see if you've got these concepts down.

Understanding these three levels of market size helps you see both the grand vision and the immediate, practical steps you need to take.