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Therefore your SOM needs to be a reasonable fractionįor the investor the ability to reach your SOM means that he will not lose his shirt. Your SAM and the strength of your competition: chances are that you are not going to take 50% market share within 6 months. your marketing plan and the identified distribution channels: you have a clear plan to reach a large portion of your target customers.your product: people will want to buy your goods.To be realistic your SOM needs to factor in:

That you will never capture a large part of the global market.Īs an investor I expect you to have a realistic objective and I will judge you on your ability to deliver that objective. The Serviceable Obtainable Market is your short term target and therefore the one that matters the most: if you cannot succeed on a fraction of the local market chances are The SOM and SAM help de-risking the investment while the TAM enables to assess the upside potential. Minimum possible of capital if the start-up has a market) and investing in opportunities which offer substantial upside potential (i.e. You need to deliver a target return to your own investors which implies both de-risking the investment early (i.e. TAM SAM SOM, when do they matter and why? Ok, now let's look at why and when they matter. Most likely you will attract fast food aficionados living or working close to your restaurants andĪ fraction of the people located further away that are willing to give your chain a try for the sake of fast food diversity. So realistically you can hope to capture only a fraction of your SAM. Now you are probably not the only fast food in town. In other words if you were the only fast food in town you would generate That is your Serviceable Available Market: the demand for you type of products within your reach. Revenues generated by fast food restaurants in other cities having similar demographics. You are starting your restaurant chain in two cities where the demand for fast food can be estimated based on: the population, their food habits, and the Had no competition you would generate TAM as revenues. Potentially, if you were present in every country and Your TAM would be the worldwide fast food restaurant market. Let's say you are starting a fast food chain. Still confused about TAM SAM SOM? Let's take an example.