Definition
The percentage of the total addressable market a company has currently captured.
Formula
Current revenue / Total addressable market x 100
How to measure
Divide current annualized revenue by the estimated total addressable market size for the category.
Why track it
Low TAM penetration signals a large remaining growth runway, while high penetration signals a company should look at market expansion or new products.
Example
A company with $8 million ARR against a $2 billion TAM has captured 0.4% of the addressable market.
FAQ
- What is TAM Penetration Rate?
- The percentage of the total addressable market a company has currently captured.
- How do you calculate TAM Penetration Rate?
- Current revenue / Total addressable market x 100
- Why track TAM Penetration Rate?
- Low TAM penetration signals a large remaining growth runway, while high penetration signals a company should look at market expansion or new products.