Serviceable Addressable Market (SAM)
Date created: Oct 12, 2022 • Last updated: Oct 12, 2022
What is Serviceable Addressable Market?
SAM measures the revenue opportunity of capturing a specific market for a product or service within your limitations and reach.
Serviceable Addressable Market Formula
How to calculate Serviceable Addressable Market
As an online retailer of beginner art supplies, you have the ability to ship products to any region within your country. Assuming there are about 10 million beginner art enthusiasts in your country, and the average order value is about $30, your SAM would be $300 million.
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How to visualize Serviceable Addressable Market?
It’s best to represent SAM either as a bar chart or as a comparison between two or more periods of time, preferably year-over-year comparisons. Take a look at some examples of how you could represent your market share research in your pitch deck:
Serviceable Addressable Market visualization examples
Comparison Chart
Serviceable Addressable Market
Bar Chart
Serviceable Addressable Market
Chart
Measuring Serviceable Addressable MarketMore about Serviceable Addressable Market
Serviceable Addressable Market (SAM) calculates the total possible revenue that could be earned by capturing 100% of a specific market limited to geography, target demographic, or other factors that segment the market for a product or service. A complete market share analysis will include SAM, Total Addressable Market (TAM), and Total Obtainable Market (TOM). TAM helps quantify the market's potential and stability, SOM measures realistic market share and sales potential, while SAM quantifies the size and revenue potential of your target audience as a whole. In terms of hierarchy, TAM is the biggest picture of market share, followed by SAM, and finally SOM.
While TAM is used in broader analyses of market potential, SAM narrows down this focus to a specific target audience. SAM assumes that you are a monopoly within your geography/target demographic, and returns the potential revenue of operating as a single entity within that market. For example, if you are the only online trade platform operating within your city, it is safe to assume you own 100% of the serviceable accessible market. In reality, this is exceedingly rare and you have to calculate SOM to obtain the true picture of potential sales.
SAM is a great way to measure demand for a product or service. It is especially useful when presenting market share analyses to potential investors. By reducing the scope of your market share calculation to your target segment, you lower the risk of investing in your startup.
Serviceable Addressable Market Frequently Asked Questions
What is a good Serviceable Addressable Market?
There is no fixed benchmark for Serviceable Addressable Market, as it varies based on industry, geography, and various other factors. However, SAM is always a percentage of and lower than your Total Addressable Market.
Why is the Serviceable Addressable Market metric important to investors?
Serviceable Addressable Market is the first real look into market share measurements of significance. In simpler words, SAM gets investors excited about the sales potential of and the demand for your product in your target market, while reducing risk by offering a realistic estimate of the return on investment.
Metric Toolkit
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