How to do it
TAM answers: is this category worth entering at all?
It is a go or no-go signal, nothing more. A TAM that cannot support a business of the shape you want is a reason to stop early — which is the whole value of calculating it.
SAM answers: what can this product serve today?
SAM is the one that moves when you build something. Adding an integration, a language, or a payment method visibly changes it, which makes SAM the number a roadmap argues about.
SOM answers: what goes in the plan?
SOM is built from a channel and a period, so it is the only one connected to actions anyone will take next quarter. Revenue forecasts, hiring plans and runway all key off SOM.
Present all three, narrowing, with sources
The sequence is the argument: here is the category, here is the part we can serve, here is what we will win and by when. A single number presented alone invites the question of which one it is.
Worked example
Three numbers, three jobs
The bottom row is a sanity check, not a rule. SAM above about 70% of TAM means the filters are not doing work; SOM above 10% of SAM in three years from one channel needs a reason you can state out loud.
Why the order matters more than the numbers
Presented in sequence, the three make an argument: here is the category, here is the part we can serve, here is what we will win and by when. Each narrowing is a claim someone can challenge, which is what makes the set persuasive rather than decorative.
Presented as one number, they make no argument at all — and the listener's first question is which of the three it is. That question is fatal in a pitch because it reveals the founder did not think about the distinction.
The most common way this goes wrong
A founder computes TAM honestly, then derives SOM as a percentage of it and never computes SAM. The result is a plan whose revenue line has no connection to any channel, and a roadmap with no market number attached to it.
The fix is mechanical: build SOM from a channel first, then check it against SAM. If SOM comes out above 10% of SAM, either the channel estimate is optimistic or SAM is too narrow — and finding out which is more useful than either number was.
What goes wrong
- Quoting TAM when someone asked what the business will make
- Deriving SOM as a percentage of TAM instead of building it from a channel
- Skipping SAM, which is the only one your roadmap can move
- Using three numbers from three different sources so they do not narrow consistently
Is your number plausible?
Each check catches a different way the arithmetic can be right and the answer still wrong.
- The three should narrow, each by a factor you can explain. Two numbers close together mean one of them is not doing its job
- If SOM is a round percentage of TAM, it was almost certainly assumed rather than built — rebuild it from a channel
- Each number should have a different source: TAM from counts, SAM from product limits, SOM from channel data
Related answers
Which one do investors want?
All three, narrowing, with sources. If pressed for one, they want SOM — because it is the only one connected to what you will actually do next year. TAM alone reads as a founder who has not thought past the market slide.
Can SAM equal TAM?
Only if your product genuinely serves every buyer in the category on day one, which is almost never true. If your SAM equals your TAM, you have probably skipped the reachability filter.
Do I need all three for a small bootstrapped business?
You need SOM. TAM and SAM are worth an hour each because they tell you whether the ceiling is high enough to bother, but the number that changes what you do next month is SOM.