A Total Addressable Market (TAM) analysis is a strategic business assessment that helps you evaluate the potential size and value of the entire market for a specific product or service. It involves identifying and quantifying the total number of potential customers or users, along with estimating the total revenue that can be generated if the company captures its maximum market share. TAM analysis is a crucial step for business planning, as it provides insights into your market's attractiveness and growth potential, aiding in decision-making and resource allocation.
You have a few options for conducting your TAM/SAM/SOM. You will need someone with experience building a TAM and they can use software like:
Each of these programs provide options for market segmentation. Now let’s go through an example scenario.
<aside> 💡 Let’s say you have a SaaS platform that targets Certified Public Accountants (CPAs). Here is what a typical scenario would look like:
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1. Define Your Market Segments:
Start by using your market segmentation tool to identify and categorize the various segments within the CPA industry. These segments could include different types of CPAs (e.g., tax accountants, auditors, forensic accountants) or various industries they serve (e.g., healthcare, finance, technology).
Collect relevant market data for each segment, such as the number of CPAs in each category, their location, and their annual spending on software solutions.