Understanding your market potential is really important for your business strategy.

Let’s break down three key ideas:

• Total Addressable Market (TAM)
• Serviceable Available Market (SAM)
• Serviceable Obtainable Market (SOM)

Imagine a lemonade stand that wants to sell lemonade to everyone in the world.

If the stand could sell a cup of lemonade to every person on the planet, the TAM would be the total money they could make from selling lemonade to 8 billion people.

That’s a lot of lemonade!

Now, let’s say our lemonade stand is located at a busy park and can only sell to people who walk by.

If the park has 1,000 people on a sunny day, the SAM would be the total money the stand could make by selling lemonade to just those 1,000 visitors, not everyone in the world.

Finally, let’s say the lemonade stand owner thinks they can convince about 20% of those park visitors to buy a cup of lemonade on that sunny day.

So, if the stand believes it can sell to 200 people, that’s the SOM.

It's the realistic number of customers they expect to serve right away!