Definition
A serviceable addressable market (SAM) is the part of a total market that your product, prices, languages and sales reach can actually serve today. It removes the customers you cannot sell to yet, such as regions you do not cover or segments your product does not fit, and leaves a realistic number.
Why it matters when you sell B2B
Total addressable market tells an investor the ceiling. SAM tells your team where to work. It is the number to plan hiring, targets and spend against.
Below SAM sits SOM, the serviceable obtainable market: the share of SAM you can realistically win in the next few years, given rivals and your own capacity.
A worked example
Continue the veterinary example: a TAM of 20,000 clinics at $2,400 a year.
From TAM to SAMExample
SAM = customers you can serve today × yearly price
- All US clinics (TAM)20,000
- On a practice system you do not integrate withminus 6,000
- Single-vet clinics, too small for the productminus 5,000
- In states you do not yet coverminus 4,000
SAM = 5,000 × $2,400 = $12 million a year
Each cut can change. Build the missing integration and 6,000 clinics move back in. That is the useful part of SAM: it shows what limits you, and what each fix is worth.
The clinics left in SAM are also the start of your ideal customer profile and your target list.
Common mistakes
- 1Using TAM as SAM. Planning against the ceiling sets targets nobody can hit.
- 2Cutting too little. If your product only works in English, the non-English market is outside SAM, however large it is.
- 3Forgetting SOM. SAM is what you could serve. What you can win this year is smaller again.
- 4Stating SAM without the cuts. Show each removal with its count, so others can check and challenge it.
- 5Never updating it. A new integration, region or price changes SAM. Recalculate when the product does.
Work out SAM in five steps
- Start from the customer count in your TAM.
- List everything that stops you serving a customer today.
- Remove each group, with a count and a source.
- Multiply what is left by the yearly price.
- Write the cuts next to the final number.