The total addressable market is the total revenue opportunity available if you captured 100% of the demand for your product. It sets the upper bound on how large the business could become. TAM is usually narrowed into serviceable and obtainable markets to reflect what you can realistically reach and win.

TAM is useful for direction and dangerous for planning. A huge TAM does not mean a huge business, because you can only reach and win a slice of it. The number that should drive your marketing plan is the serviceable obtainable market, the part you can actually reach and close, given your model and resources.

Example:

 If 50,000 companies fit your product at an average of $20,000 per year, TAM is $1 billion. Your serviceable obtainable market might be a small fraction that you can realistically reach.

What is the difference between TAM, SAM, and SOM?

 TAM is the total market. SAM is the serviceable portion that your product and model can address. SOM is the obtainable share you can realistically capture in the near term.

Why is TAM alone a poor planning tool?

 TAM ignores what you can actually reach and win. Marketing plans should be built on the obtainable market, not the theoretical maximum.