Total Addressable Market (TAM)

The total revenue available if a product captured all potential customers in a defined market.

Example

40,000 practices paying 3,600 a year gives a TAM of 144,000,000.

A large top-down TAM with an assumed small share is weak evidence; what matters is who the customers are and how many can realistically be reached.

Bottom-Up Market Sizing — Estimating a market by counting specific potential customers and multiplying by a realistic price, rather than starting from an industry total.

A market is the customers you can name, times what they will pay — Commercial diligence tests market claims by building them from countable customers and realistic prices, then checking the parts the company can actually reach. (10 min)
One percent of a huge number is not a market size — Top-down market sizing starts with a large industry figure and assumes a share. Bottom-up sizing counts real customers and prices. Only the second tells you anything reliable. (12 min)