How Big Is Your Market? How to Calculate Your Market Opportunity & Addressable Market

You need to understand the size of the opportunity in front of you. Many businesses skip this step—either assuming the market is big enough or not considering how difficult it might be to reach potential customers. But without this knowledge, how do you know if your plan is realistic?

Working out your market opportunity helps you:

✅ Prove to yourself that the opportunity is big enough.

✅ Validate your customer profiles—do these people actually exist and want to buy?

✅ Understand your approach to growth—do you need to steal customers from competitors, or can you simply reach new ones?

✅ Make informed decisions about pricing, marketing, and long-term sustainability.

Let’s break down how to calculate your market opportunity and addressable market in a way that actually guides your business decisions.

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1️⃣ Start With the Total Market Opportunity (TAM)

📌 What is TAM? TAM (Total Addressable Market) is the entire potential market for your product or service. If every possible customer bought from you, this is how big the market would be. But TAM is just a theoretical number—no single business captures 100% of a market. Instead, it’s a starting point to understand the bigger picture.

🚀 Example:

• You run a bespoke tailoring business. The global market for high-end menswear is $15 billion—that’s your TAM.

• You launch a handmade ceramics brand. If every homeware buyer in the UK purchased from you, the TAM might be 5 million customers.

🔎 How to calculate TAM:

✔️ Use industry reports (IBISWorld, Statista, government data).

✔️ Research the total revenue of your industry.

✔️ Estimate the total number of potential customers.

📌 Why it matters: TAM shows how much demand exists, but it doesn’t tell you how much of that you can realistically capture. That’s where we refine it further.

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2️⃣ Narrow It Down to the Serviceable Available Market (SAM)

📌 What is SAM? SAM (Serviceable Available Market) is the portion of TAM that applies to your business, based on factors like geography, niche, pricing, or audience segment.

🚀 Example:

• Your bespoke tailoring business only serves UK customers. The TAM might be $15 billion globally, but your SAM is the UK’s high-end tailoring industry—let’s say £300 million.

• Your ceramics brand only sells direct-to-consumer online. The total homeware market might be 5 million UK customers, but only 500,000 buy online—so your SAM is 500,000 customers.

🔎 How to calculate SAM:

✔️ Filter your TAM by geography, customer type, or business model.

✔️ Find out how many potential customers actually fit your niche.

✔️ Research what competitors are already serving them—what’s left for you?

📌 Why it matters: SAM helps you realistically define your market instead of chasing an audience you’ll never reach.

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3️⃣ Define Your Serviceable Obtainable Market (SOM)

📌 What is SOM? SOM (Serviceable Obtainable Market) is the portion of SAM you can realistically capture based on competition, marketing, and your business capacity. It’s your real, achievable market.

🚀 Example:

• Your tailoring business can only handle 200 clients per year. If there are 5,000 potential high-end tailoring clients in the UK, your SOM is 200 per year.

• Your ceramics brand can only afford to acquire 5,000 customers in year one. Even if 500,000 people buy online, your SOM is 5,000 customers.

🔎 How to calculate SOM:

✔️ Consider your operational limits—how many customers can you actually serve?

✔️ Estimate your market share based on competitors and pricing.

✔️ Look at customer acquisition costs—how many people can you afford to reach?

📌 Why it matters: SOM gives you a realistic revenue estimate—helping you decide where to focus, how to price, and what strategies will work best.

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4️⃣ Bringing It All Together: Example Breakdown

Example: A New Subscription-Based Coffee Brand

🔹 TAM: The global coffee subscription market is $10 billion.

🔹 SAM: You only serve UK customers—reducing SAM to £500 million.

🔹 SOM: You can only afford to acquire 10,000 customers in your first year.

💡 Final takeaway: Instead of assuming a £10 billion market, you now realistically target a 10,000-customer niche—making your business plan focused and actionable.

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5️⃣ Why This Information Changes How You Grow

When you know your TAM, SAM, and SOM, you can:

✅ Prove to yourself that your business has room to grow.

✅ Decide whether you need to compete for customers—or find new ones.

✅ Set realistic sales, marketing, and pricing strategies.

📌 Key Insight: Some businesses thrive by taking customers from competitors. Others grow by reaching an untapped audience. Knowing your market helps you decide which approach to take.

🚀 Example Scenarios:

🔹 If your market is small and saturated, you need to focus on differentiation and stealing market share.

🔹 If your market is large and growing, you can find and educate new customers instead of competing.

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Final Checklist: Have You Defined Your Market Properly?

Before moving forward, make sure you can answer:

✅ Who are my actual customers? (Not just “everyone who drinks coffee” but “UK professionals who buy premium coffee online.”)

✅ How many of them are there? (Have I checked real numbers, or am I guessing?)

✅ How much of this market can I realistically serve? (Do I have the budget, capacity, and reach to serve them?)

✅ Do I need to take customers from competitors, or can I reach new buyers? (What’s my growth strategy?)

🚨 If you can’t confidently answer these, you may need to refine your strategy before investing further.

📌 What to do next:

• Deepen your research—validate your customer profiles.

• Refine your strategy—adjust pricing, marketing, or positioning.

• Test the market—before launching at full scale.

💡 Where I can help: If you need guidance in mapping out your market opportunity and customer base, I work with founders to define, test, and refine their growth strategies.

📅 Book a free 30-minute call to break down your market opportunity.