Total Addressable Market (TAM)
Definition - What does Total Addressable Market (TAM) mean?
Assessing the total addressable market is crucial for startups as well as existing enterprises because this estimate enables them to prioritize the available markets, customer segments, products and business opportunities by comparing the potential for revenue generation and profits. Finally, it leads to a viable value proposition offering to potential investors and buyers of businesses.
Total adressable market is also known as global total market, even if the proposed business is unable to serve some parts of this market.
Divestopedia explains Total Addressable Market (TAM)
The TAM calculation is indicative of the overall revenue generation potential of a specific product or service, inclusive of the market outside the reach of the present or proposed firm. It is important to start with this estimate because it helps determine the size of the available market for which the firm can reasonably compete.
Steps involved in sizing the total addressable market include:
- Collecting data from sources such as government reports, research reports, journals
- Gathering estimates and opinions from salesmen as well as surveys
- Compiling figures from competitor publications
- Scanning trade association reports and professional bodies