Total addressable market (TAM) is the total revenue opportunity that is available to a product or service if 100% market share is achieved. In other words, it’s the amount of market that a company could gain if there were no competitors.
Total addressable market is a metric that helps to determine the level of effort and funding that a business needs to put into a product or service, making it an especially important concept for start-up businesses as it helps them to assess their viability. Where there are potential investors or buyers that exist, company leaders can use total addressable market metric to provide realistic value propositions for access to investments and other funding.
Calculating total addressable market helps businesses to:
- Focus on their future product evolution
- Assess how their product will fit in the market
- Attract investors by demonstrating viability
- Identify competitors early on