Definition
The total revenue opportunity available if a product achieved 100% market share of everyone who could theoretically buy it.
Why it matters for growth
TAM sizing helps a founder and investors judge whether a business, even if executed perfectly, can reach a meaningful scale.
Example
A founder estimates a $2 billion TAM by multiplying the total number of small businesses in a target market by average annual spend on the category.
FAQ
- What is Total Addressable Market (TAM)?
- The total revenue opportunity available if a product achieved 100% market share of everyone who could theoretically buy it.
- Why does Total Addressable Market (TAM) matter for growth?
- TAM sizing helps a founder and investors judge whether a business, even if executed perfectly, can reach a meaningful scale.
- What is an example of Total Addressable Market (TAM)?
- A founder estimates a $2 billion TAM by multiplying the total number of small businesses in a target market by average annual spend on the category.