Definition · also called total addressable market, TAM SAM SOM, market size
TAM (total addressable market) is the total annual revenue available for a product if it won every possible customer. It is usually paired with two narrower numbers:
- SAM (serviceable addressable market): the part of TAM your product can actually serve, given its features, language, geography and channels.
- SOM (serviceable obtainable market): the share of SAM you can realistically win in the next few years.
Investors use TAM to judge whether a company could ever become huge. Indie makers should use it the other way round: to check that a market is big enough to support them, and small enough that big funded companies leave it alone.
TAM formula
TAM (bottom-up) = number of potential customers × annual price (ACV)
- Bottom-up beats top-down. “1% of a $50B market” is not a plan; counting real potential customers and a price they pay is.
- SAM = TAM filtered to customers you can reach and serve; SOM = SAM × a realistic market share.
Worked example: a niche B2B tool
Suppose there are 5,000 businesses in a trade in your country and you charge $40/month ($480/year). These are illustrative numbers.
- TAM = 5,000 × $480 = $2.4M a year
- SAM: 60% of them use a smartphone-based workflow you support = $1.44M
- SOM: winning 15% of SAM over three years = about $216K ARR
Too small for a venture fund. A very good business for one or two founders.
How much TAM does an indie product need?
Work backwards from your goal. If you want $10K MRR at $20/month, you need 500 customers; at a 2% realistic share that means a SAM of about 25,000 potential customers. If you can't name where those 25,000 are, the market is too small or your price is too low.
A small TAM is also a moat: a $5M market doesn't attract venture-backed competitors, which is exactly why micro SaaS works.
TAM in practice: how indie makers use it
Makers in the directory who chose markets by size and fit rather than by pitch-deck appeal:
Sweep Certificates serves chimney sweeps and stove installers in the UK and Ireland, a tightly defined SAM. It began when his co-founder, a sweep, was losing around four hours a day to paperwork in the busy season. (source: sweepcertificates.co.uk)
Storemapper did one thing, store locators for e-commerce sites, and reached about $40K MRR as a one-person business before he sold it in 2017. (source: saasclub.io)
Found around 200 existing uptime-monitoring tools before starting OnlineOrNot and competed anyway: a big TAM with many players can still leave room for a small, well-run product. (source: maxrozen.com)
Picked a “boring” B2B problem, async video screening for hiring, and grew Hirevire to about $13.8K MRR (verified, October 2026). (source: trustmrr.com)
Frequently asked questions
What does TAM mean?
TAM stands for total addressable market: the total annual revenue available if a product won every possible customer in its market.
What is the difference between TAM, SAM and SOM?
TAM is the whole market, SAM is the part your product can serve, and SOM is the share of SAM you can realistically win in the next few years.
How do you calculate TAM?
Bottom-up: count the potential customers and multiply by the annual price they would pay. This is more credible than taking a percentage of an industry-wide figure.
Is a small TAM bad?
Not for a bootstrapped business. A market worth a few million dollars a year is too small for venture capital but can comfortably support a solo founder or small team.
Related terms
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Maker examples are paraphrased from the cited sources and from each maker's IndieMakerList profile; revenue is self-reported unless marked verified. Spotted an error? Tell us.