Glossary: targeting
What is total addressable market (TAM)?
Total addressable market (TAM) is the yearly revenue you would earn if every company that could use your product bought it. You work it out by multiplying the number of companies that fit by the yearly revenue per customer.
Formula
Worked example
4,000 × $6,000 = $24 million
Total addressable market is companies that fit times yearly revenue per customer.
The formula has two inputs, and two narrower measures sit inside the result. All three matter when you size an outbound campaign.
TAM is everyone who could buy.
Count the companies that match your ideal customer profile, then multiply by what one customer pays in a year. Counting accounts from the bottom up is easier to defend than a share of an industry total.
SAM is the part you can serve.
Serviceable addressable market removes companies outside your regions, languages or product limits. It is the part of TAM you could sell to today.
SOM is the part you can win.
Serviceable obtainable market is the share of SAM you can reach with your current team, budget and channels in a set period.
Here is total addressable market worked out for an invented company.
Imagine Ostermere, an invented company that sells route planning software to regional freight firms for $6,000 a year. A data search finds 4,000 firms worldwide that match its profile, so its TAM is 4,000 × $6,000 = $24 million a year.
Ostermere only sells in English-speaking countries, where 1,500 firms sit. Its SAM is 1,500 × $6,000 = $9 million. Its team can work 300 firms this year, so its SOM is 300 × $6,000 = $1.8 million. The outbound list starts with those 300.
Ostermere's market, from everyone to this year's list
Use total addressable market to size the list and the plan.
For outbound, the account count inside TAM is more useful than the dollar figure. It tells you how long a campaign can run before it runs out of people.
The four steps in order
- 1Count accounts
- 2Cut to SAM
- 3Plan the pace
- 4Recount yearly
- 1
Count accounts before dollars.
Search for companies that match the profile and record the number. That count is the ceiling for every list you will ever build.
- 2
Remove the accounts you cannot serve.
Take out regions, sizes and sectors you cannot sell to today. What is left is the real pool.
- 3
Divide the pool by your sending pace.
If the pool is 1,500 accounts and you contact 300 a quarter, the market lasts five quarters before you return to earlier accounts.
- 4
Recount once a year.
New companies appear and others close. A yearly recount keeps the plan honest.
Prymatica sources and verifies a custom prospect list for your exact ICP, up to 10,000 contacts per campaign across most B2B industries and regions. See how Prymatica's cold email process works.
Teams make these mistakes with total addressable market.
The number comes from the top down.
Taking a small slice of a huge industry figure tells you nothing about who to email. Count real accounts that match the profile.
TAM is treated as a forecast.
TAM is a ceiling, not a plan. What you can win this year is the much smaller obtainable share.
Contacts and accounts are mixed up.
One account may hold four people worth emailing. Count companies for market size and contacts for list size, and keep the two apart.
These glossary terms sit next to total addressable market.
These Prymatica pages go deeper on total addressable market.
Questions
People ask these questions about total addressable market.
How do you calculate total addressable market?
Multiply the number of companies that fit your ideal customer profile by the yearly revenue one customer brings. For example, 4,000 companies at $6,000 a year is a TAM of $24 million.
What is the difference between TAM, SAM and SOM?
TAM is every company that could buy. SAM is the part you can serve with your current product and regions. SOM is the part you can win in a set period with your current team and budget. Each sits inside the one before.
Why does TAM matter for outbound sales?
It tells you how many accounts exist, and so how long outbound can run before the list is used up. A small market calls for careful, personal outreach. A large one can support more volume and more testing.
Is a bigger TAM always better?
No. A large market with a vague profile produces unfocused lists and weak replies. A smaller market you can describe exactly is easier to reach and easier to win.
Want your inbox filled with qualified leads?
Let's scale together. Book a free intro call and we'll show you exactly how we'll fill your pipeline with meetings from the industries you want to target.
No contracts. Start free. Cancel anytime.