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Perform TAM calculations and analysis using 3 methods

April 24, 2024
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You’ve probably already heard of TAM, maybe even SOM or SAM but… what does it all mean? What are the differences and, most importantly, why is it relevant for your business?

First off, what is TAM? Your Total Addressable Market is everything available to you. Imagine a perfect world where everybody who could possibly want your solution buys it. That’s your TAM. It’s the maximum demand and revenue you can get.

Knowing this helps you set realistic goals. Based on your market, you will be able to align internally on what that means and prioritize and personalize accordingly.

There are 3 ways to calculate your TAM: top-down, bottom-up, and through value theory. 

We will dive into the different concepts and calculations and explore how you can use Captain Data to map your total addressable market.

Understanding the difference between TAM, SAM & SOM

Before we dive into it, keep in mind that one company can have multiple TAMs if they serve different markets, which usually translates into different products and offers.

We’ve already set that TAM definition is the amount of demand and revenue you get in the best possible scenario. In other words, it’s 100% of the market share.

However, monopolies aren’t that common anymore. In this light, the Serviceable Available Market, also known as SAM, is what you project depending on your business model. This target is smaller than the TAM but still leaves room for a good chunk of market potential.

A more conservative measure is the Service Obtainable Market or SOM. It fully acknowledges the competitive landscape at a certain point in time, which is why it’s often used for short-term growth.

From everyone in your market (TAM), you’re keeping only the potential customers for the SAM. Then, how many percent of this SAM is realistically achievable is what gets your SOM.

To wrap it up, if we were to imagine TAM, SAM, and SOM as company employees:

  • TAM would be your overly joyful new intern, or the very ambitious - slightly delusional - CEO
  • SAM would be your rational CFO
  • SOM would be your realistic Head of Sales

These three will come together as we dive into how to calculate the total addressable market.

Enhancing the Top-Down Approach

The first approach is top-down. Here, TAM calculation is based on how many companies there are in your market and how much they usually spend for that market category.

As an example, let’s focus on a data SaaS for B2B companies. 

Technically our total market size could be the total number of B2B companies in the US, around three million. Now that you have the number of companies, what would be the maximum amount of revenue they could generate? In the top-down approach, you need to base yourself on the statistics. How much do companies typically spend on that market category? Let’s say we found a robust study stating that the average spending for data in American B2B companies is $1,000,000.

The TAM calculation would be as follows:

TAM = number of companies in the market x average spending per company in this market
So we have TAM_data_company = number of B2B companies in the US x average spending for data in the US
= 3,000,000 x 1,000,000 = 3,000,000,000,000

Nice, right? For a huge company why not, for a rising startup, probably too nice.

You want to tread lightly because variables can easily change in our scenario. 

The data spent on this study might not reflect the data spend that we are really targeting. Maybe the average data spend in this study contains the cost of the CRM and in our case we’re selling data for the CRM, among other things, but not the CRM itself.

Maybe we’ve found that in the past 3 years, our deals signed in the tech industry add 40% more ARR than other industries and are 95% less likely to churn. Our market could thus be considered as B2B tech companies and not only B2B companies. By refining this, we went down from three million to one million companies. A two million difference, even if the amount they spend is one cent, is already a 20,000 gap.


The bottom-up approach reflects the situation of your specific company. It will start from your Annual Contract Value or ACV, which can be broken down into the average sales price times the total number of customers. Because it is based on how many customers you have and how much they pay, it is often considered the most reliable for your business. Just like you can have different TAMs for different segments, you probably have different ACVs for different segments.

The second element of the TAM calculation is the SAM, our rational CFO. As a reminder, the Service Available Market is what is targeted for the company’s segments. 

With the bottom-up approach we thus have:

= (average sales price x total number of customers) x number of potential customers in the market

Let’s review this with a quick example.

If our average sales price per customer is $400 and we have 500 customers, our ACV would be $200,000. Now if our area has 550,000 potential customers, we have:

TAM = ACV x SAM = $200,000 x 550,000 = 110,000,000,000

Applying Value Theory with Captain Data

The value theory approach is most helpful for starting businesses, as it is biased.

The idea is to see how many people there are in your market and how much they are willing to pay. The key here is the pricing variable, as you will need to match it to how much added value this new offering provides. TAM is always about theoretical revenue, but this one is the most far-fetched. However, it’s awesome to feel the market as you start developing your offer.

Let’s say you want to open a top-notch experience coffee shop. You’re targeting perfect bean addicts in your local area who can’t let go of their phones. You love that about them and you’re going to recommend the times for their coffee runs based on their agendas, they just have to say yes. No register, no walk-ins, only baristas, and excellent customer service. Great added value but very niche so small market right? 

Surveys or qualitative interviews will usually help in determining how much extra they are willing to pay for this very specific service.

Your TAM would be the total market size x the price.

For our example, we’ve established that there are 25,000 people in the area where we would open this coffee shop and 5,000 have expressed interest in this new experience. The price set is $5 per cup of coffee. Thus, we have:

TAM_coffee_shop = customers for this premium coffee shop x price of a coffee = 5,000 x $5 = 25,000

Implementing TAM Analysis with Captain Data

We’ve seen that there are three main ways to calculate your TAM, and there are also several ways you could get the data you need for your TAM analysis.

For the top-down analysis, you will want to find reliable data from online resources such as Gartner, the World Trade Organization, or any public database. 

The bottom-up approach mainly relies on existing data, having a reliable CRM can be critical in establishing your segments. You need enriched data to draw a map of your ideal customer profile or ICP, and you can have several ICPs depending on your offers! In this case, you can explore our enrichment workflows to get all the data you need based on the company’s LinkedIn URL, domain, or even just its name.

The value theory approach is mainly based on feedback. Captain Data can help you extract customer reviews at scale from Amazon, Ebay, Ekomi, Glassdoor, Google Maps, Tripadvisor, The Fork, Trustpilot, and even Trusted Shops.

No matter which approach you take, at one point or another you will have to find how many targets are in your market. 

If you target companies, they most likely have a LinkedIn page. With Captain data, you’ll be able to find companies from a Sales Navigator search. Looking back at our previous example targeting US companies, we can see on a basic LinkedIn search that more than 16 million companies in the US have a LinkedIn page. 

However, as we saw in the different ways to calculate your total addressable market, your market usually has more criteria than just being a business in the US with a LinkedIn page. It can be a specific industry, headcount… There are a ton of LinkedIn filters you can leverage to adapt to your ICP. Discover them in our LinkedIn Sales Navigator guide.

Moreover, you can add an extra scoring step if you have stricter criteria. You can use Captain Data’s workflows to search Sales Navigator metrics or Extract Sales Navigator Company Employee Distribution & Headcount.

Any company that shows up in your research will be extracted and enriched, which makes it easy for you to map your total addressable market afterward.

Since not all businesses have a LinkedIn page, especially for smaller businesses like bakeries, plumbers, and restaurants… we also have a Google Maps integration. 

When you search for bakeries in Paris for example, you will see a list of bakeries on the left side. 

Whereas you can browse all results from a LinkedIn search, the results listed on a Google Maps search are limited. The truth is, there are a lot more than 200 bakeries in Paris. That’s where Captain Data comes in.

With a simple Google Sheets, you can easily map all the bakeries in Paris using zip codes. You can find a list of all the area zip codes on Google. In our example, we’ll focus on Paris 75001 to 75020 and then just build our search using the =CONCATENATE formula.

This way, we’re able to extract all of the bakeries in Paris and realize that there are more than eight times the original number of bakeries displayed initially.

Why Captain Data Stands Out

Captain Data’s automated workflows enable you to calculate your Total Addressable Market, Service Available Market as well as your Service Obtainable Market.

Beyond just identifying how many companies there are, what makes Captain Data stand out is that you will be able to extract and enrich them. This enables you to map and prioritize the companies you want to target.

Of course, our workflows are a lot faster than if you were to do it manually. However, they’re also better than other sourcing tools because all of the variable mapping is already done for you, which enhances the output quality. You only have to upload your input and then Captain Data will give you all the information. You can retrieve it through CSV, push it to a spreadsheet, or even directly to your CRM with a specific tag enabling you to identify these companies.

Imagine a software company planning to launch a new CRM feature for small to mid-sized retail businesses in the U.S. They need to figure out their Total Addressable Market (TAM) to effectively market this feature.

Here's how Captain Data helps automate this process:

  • Data Extraction: First, Captain Data automates the scraping of LinkedIn to identify potential leads for the TAM. It extracts data such as company size or location from retail business profiles.
  • Data Enrichment: Next, Captain Data enriches the data extracted in the previous step with additional information scraped on the web to fine-tune the market size.

TAM Calculation: The enriched data is then used to calculate the TAM. The company segments the market by company size within a region estimating the number of businesses likely to be interested in their CRM feature.

Captain Data enhances market intelligence by providing valuable data and insights that can inform strategic decisions and drive revenue.

Wrapping It Up

We stripped down a lot of acronyms in this article to show you the different ways to calculate your market size in the hope of setting reliable goals and aligning the internal efforts accordingly.

Captain Data emerges as a pivotal tool for TAM calculations and strategic market analysis, offering automation, accuracy, and versatility. Its ability to extract, enrich, and map data enhances decision-making efficiency, empowering businesses to adapt swiftly to market dynamics. 

Curious to see more? Request a demo.

Guillaume Odier
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