TAM SAM SOM market sizing template (Excel)

What it is

TAM, SAM and SOM are three nested estimates of how big a market is. TAM, the total addressable market, is the revenue available if everyone who could use your kind of offer did. SAM, the serviceable addressable market, is the part you can serve with your product, channels and geography. SOM, the serviceable obtainable market, is the part you can realistically win in a stated time.

Definitions differ a little between sources, so state yours next to the numbers. This workbook builds each figure twice: bottom-up (customers times revenue per customer, by segment) and top-down (a published market figure narrowed in three steps). Then it compares them.

Who it is for

Founders and product teams writing a plan, analysts and students learning the method, and investors who want to test a market claim in a pitch. No macros, add-ins or external links: it works in Excel and in other spreadsheet programs.

When to use it, and when not to

• Use it to size a market before a launch, to back a business plan or funding request, or to check someone else's market-size claim.
• Use it when you want the assumptions visible, so a reader can change them and see the effect.
• Do not use it as a revenue forecast. SOM says how much you could win under stated assumptions, and the pace and cost of winning it are separate questions.
• Do not use it to value a company. That needs cash flows; see the DCF template.

What is inside

Two sheets. Read me explains the file. Model holds six blocks:

1. Settings: a currency label, the reconciliation tolerance, and the low and high cases as shares of the base case.
2. Bottom-up by segment: five rows, each with customers, revenue per customer, the share you can serve and the share you can win.
3. Top-down: a published market size, three narrowing steps and a place to write the source.
4. Reconciliation: the gap between the two methods for TAM, SAM and SOM, flagged OK or REVIEW.
5. Low, base and high cases for the obtainable market.
6. Checks: shares in range, SOM no larger than SAM and SAM no larger than TAM, a revenue figure for every segment, a written source, and agreement on TAM.

Named input cells, such as Tolerance, TD_Market_Size and Seg_Customers, make the inputs easy to find from the name box.

How to fill it in

1. Pick one currency and one period (a year) and use them everywhere.
2. List your customer segments. Define a segment so a customer sits in only one.
3. For each segment, enter the number of customers and what one pays per year. Use counts from a register, a trade body or your own pipeline, and note where each came from.
4. Set the share you can serve for each segment: the part reachable with your product, channels and region. Be strict about what you can actually sell to.
5. Set the share you can win by your target date. Test it against how many customers you can reach and onboard in that time.
6. In the top-down block, enter a published market size and its source and year. Narrow it with the three shares.
7. Read the reconciliation. If the methods disagree by more than your tolerance, find out why before you quote either number.
8. Make sure every check reads OK, then use the low and high cases to show a range.

Worked example (an illustration)

Illustration only. The company, the segments and every number below are made up, with round figures, to show how the model works. They are not market data.

A made-up invoicing tool for accounting firms sizes its market bottom-up:

The top-down cross-check starts from a made-up published figure of 600M, takes 30% as relevant to the offer (TAM 180M), 55% as servable (SAM 99M) and 2.5% as winnable (SOM 2.475M). The gaps against the bottom-up numbers are about -3%, +2% and +2%, inside the 25% tolerance, so every check reads OK. If the top-down figure had been 2.4 billion, the gap would be large and the reconciliation would read REVIEW.

Common mistakes

• Treating a published market size as your TAM without checking that it measures your kind of offer.
• Setting the obtainable share by hope. Tie it to the customers you can reach, not to a round percentage.
• Mixing periods or currencies, or counting a customer in two segments.
• Leaving the source blank. A market figure with no source is an opinion.
• Quoting SOM as a forecast. It is a ceiling under stated assumptions.

Download

Free to download. The numbers in the file are made up, so replace them.

Use and limits

Free to use and adapt for your own work. If you publish or share it, a link back is appreciated.

Sources and further reading

Sources are linked so you can check them. Statements that vary by employer, or that accounts disagree about, are hedged in the text. Found a mistake? Email support@forwardeployed.work and we will correct the page and update its date.

1. Total addressable market. Encyclopedia entry.
2. Serviceable obtainable market. Encyclopedia entry.
3. Market size. Encyclopedia entry.