Why Total Addressable Market (TAM) Matters — and How To Find Yours

Total Addressable Market (TAM) is the maximum size of the audience or market for any given product or solution. It represents the largest possible audience your product would have if every single person who could use your solution started using it. TAM can be calculated by multiplying the average revenue per user (ARPU) by the total number of potential customers in the total market. Understanding your TAM is essential for creating a business plan and understanding the scope of opportunity available with your idea. It helps communicate potential more effectively, decide if you should move forward with your idea, find overlooked opportunities, and understand the scale available for different strategies. There are three main methods to calculate TAM: top-down, bottom-up, or the value theory approach.