• Tamara

TAM/SAM/SOM what? How to perform a market sizing for your business

A business is supposed to generate revenues and make money. This revenue potential depends on the size of the market, that's why new business need to estimate the potential market size they will serve. Investors will also look at investing in startups that cover interesting market. Interesting market usually mean large, growing markets that will be big in the next years.

What are Market Sizing and Growth?

Market sizing is the estimation of the potential market size for your business. The market size represents the potential amount of sales per year for your solutions.

The growth indicates the percentage by which the market will increase every year.

Why are Market Sizing and Growth important?

  • A market size shows the limits of the market and an upper limit to potential revenues (your revenues will be a small percentage of the market size). Thus, it gives directions into what kind of revenues a company might expect.

  • A market size and growth indicate the attractiveness of a market. Investors won't invest in declining markets...

  • Investors look for markets that can be big in the next few years

How to look at Market Sizing and Growth?

Generally, a common framework for calculating the market size is the TAM/SAM/SOM (Framework: TAM/SAM/SOM).