TAM, SAM, SOM: Why Startups Get it Wrong, and How to Get it Right

When it comes to market sizing, the acronyms TAM, SAM, and SOM dominate pitch decks and investor meetings. They’re the holy trinity of startup opportunity assessments. But many startups misuse these metrics, setting themselves up for frustration and avoidable pivots.

The problem is simple: an obsession with TAM—Total Addressable Market—blinds companies to the strategic focus required to dominate a niche and scale sustainably. 

TAM: The mirage of the infinite opportunity

TAM represents the total theoretical revenue opportunity if your company were to achieve 100% market share. It’s a seductive figure—often inflated for the sake of appearances. 

“18 million businesses could use our product!” you might say, and technically, that might be true. But this number lacks the critical detail: how many of them are struggling with the problem your product solves?

Here’s the reality: TAM is not strategy; it’s just a starting point. Knowing that the market is large is only useful if you can pinpoint where to begin. For startups, this is where things often go off the rails. 

In the quest to impress investors, they chase an oversized TAM, ignoring the fact that no startup has the resources to conquer a massive market outright.

SAM: Zeroing in on realistic opportunities

The Serviceable Addressable Market (SAM) narrows the focus to the segment of TAM that your current offerings, distribution channels, and expertise can realistically serve. It’s a critical step forward, but even SAM can be too broad. 

Imagine being a small team trying to tackle “all companies with 1,000 employees.” That’s still too diverse, with too many decision-makers and varying needs.

Instead, ask yourself:

• Who feels the pain most acutely?
• Where can we deliver outsized value compared to competitors?

Answering these questions helps you define a SAM that’s not just realistic but strategically aligned with your strengths.

SOM: The market you can dominate

Here’s where the magic happens: the Serviceable Obtainable Market (SOM). This is the slice of SAM you can realistically capture in a defined timeframe. It forces you to focus on the customers most likely to adopt your product, creating a beachhead for expansion.

Think of SOM as the intersection of:

1. High-value customers: Those willing and able to pay for your solution.
2. Achievable reach: Customers you can access with your current resources.
3. Defensible differentiation: A segment where you can establish clear superiority.

By focusing on SOM, you create a foothold in the market, generate momentum, and build credibility for future growth.

Why TAM is misleading—and how to course correct

The fixation on TAM often stems from fear—fear of narrowing down and limiting growth potential. Many founders worry that focusing on a small segment will box them in. But here’s the paradox: the broader your focus, the harder it is to gain traction.

To dominate a market, you need to start small. Not randomly small, but strategically small. Geoffrey Moore’s “Crossing the Chasm” framework emphasizes this with the concept of the “beachhead.” By targeting a niche with acute needs, you can win decisively and leverage that success to scale into adjacent segments.

Related: The Essential Guide to Why, When, and How to Niche Down

Positioning: The power of specificity

Context matters as much as the product itself. When you position your product for a specific audience with a clear pain point, you become indispensable. 

Broad, feature-laden pitches dilute your value proposition. But when you can answer, “Why us, and why now?” for a well-defined group, you start to dominate.

For example, instead of targeting “all SMBs,” focus on “medical practices with 10–50 employees struggling with patient scheduling.” Instead of selling to “all enterprise IT teams,” focus on “DevOps teams in financial services firms grappling with cloud cost overruns.” 

The narrower the focus, the more targeted your messaging and value delivery.

Actionable steps to avoid the TAM trap

1. Start with the Problem, Not the Product.
   Your product doesn’t create demand; problems do. Identify where the pain is sharpest and most urgent.
2. Validate Before Scaling.
   Talk to potential customers, pilot your solution, and test your assumptions. Is the problem as widespread and critical as you think?
3. Embrace the Power of No.
   Saying no to non-ideal customers doesn’t limit you; it liberates you to focus on those you can truly serve.
4. Iterate on Positioning.
   Context changes everything. Tailor your positioning to highlight your product’s value in the most compelling scenarios.
5. Plan for Expansion, But Don’t Rush It.
   Dominate your initial segment. Use the lessons and credibility you build to expand thoughtfully into adjacent markets.

Related: A Growth Hacker's Guide to Reducing Customer Churn

Final thoughts: TAM Is the map, not the treasure

Startups that fixate on TAM risk spreading themselves too thin, chasing opportunity without strategy. Instead, focus on the SOM—the market you can win. As you gain traction, you’ll find that dominance in one segment unlocks opportunities in others.

Think of it this way: TAM is the entire ocean. But you’re not fishing the ocean—you’re fishing a lake, and you need to know which fish you’re after. By narrowing your focus and aligning your efforts, you not only improve your chances of success—you build the foundation for scaling with purpose.

So next time you’re tempted to wow someone with a TAM number, remember this: it’s not about how big the market is. It’s about how well you can win.