Before launching a product or starting a business, you need to know if enough people will actually buy what you're selling. This is where market sizing comes in. It’s the process of estimating the number of potential customers and the potential revenue in a specific market.

The first and biggest piece of the puzzle is the Total Addressable Market, or TAM. Think of it as the total, worldwide demand for a product or service. If you were the only company in the world selling your product and you could reach every single potential customer, your revenue would be the TAM. It’s a big, optimistic number that shows the maximum possible scale of your idea.

Of course, no business can reach every potential customer on the planet. Your reach is limited by geography, language, regulations, and your own business model. That's why we need to narrow it down.

The Serviceable Available Market (SAM) is the segment of the TAM that your products and services can actually reach. For example, if your TAM is the global market for shoes, your SAM might be online shoe shoppers in North America, because that's where your company operates and ships to.

But you won't capture all of that market, either. You have competitors. The Serviceable Obtainable Market (SOM), sometimes called Share of Market, is the portion of the SAM you can realistically capture in the near term. This is your target for the first few years of business. It accounts for competition, your marketing budget, and your team's ability to execute.

Let's make this concrete. Imagine you want to open a specialty coffee shop.

• TAM: This would be the total global spending on coffee each year. It’s a huge number, representing every cup sold everywhere.
• SAM: Your shop is in downtown Austin, Texas. Your SAM is the total amount spent on coffee by people who live or work within a two-mile radius of your location. This is the market you can service.
• SOM: Within that two-mile radius, there are already five other coffee shops. Your SOM is the share of the local coffee market you can realistically win in your first year, based on your unique offerings, marketing plan, and the strength of your competitors.

Thinking through TAM, SAM, and SOM gives you a clear, realistic view of your business opportunity. It grounds your ambition in reality and provides a roadmap for growth, from capturing your initial target market to eventually expanding your reach.