SAM vs TAM: Market Size Explained 📊

Now, for those of you that may be wondering what the hell is a service addressable market in the first place?

Just hear me out.

I'll clarify absolutely everything.

I'll define some of these fancy acronyms that you see on the screen and I'll try to make this as simple as possible to digest.

So to start with, you may have watched a show like Shark Tank or Dragon's Den if you're based in the uk and typically you hear the founders talk about how big their total addressable market is.

So a lot of the time, founders, whenever they're raising money from investors, they say some wild claims like, we're serving a potential market of 100 million people, or, hey, we have over 20,000, businesses in Nigeria that we want to serve with this, like, market opportunity, right?

And when they say this stuff, most of the time they're doing that on the assumption that they're going to capture 100% market share.

And that's what's referred to as the TAM, the total addressable market.

The total addressable market basically assumes that you have 100% market share in every single industry geography that you operate in.

So in other words, if I was to draw a diagram, this would be my total addressable market, right?

So I'm just going to call this tam.

This would be literally every country, every industry that we're targeting, assuming that we have, 100% of the customers, choosing our product or service.

A lot of companies call the process of, like, identifying and segmenting their target markets.

They call that process the TAM mapping.

In my case, it's super pointless to call it TAM mapping because you're not actually trying to figure out every single company and every single geography because it's not feasible for you to go and scrape and build lead lists for 100 million people.

So for that reason, I recommend that most companies forget about the total addressable markets when they do this kind of market mapping, but instead they use the serviceable, available markets and the service.

Available markets is the segment of the total markets that you can realistically serve based on your company level and your Persona level, ideal client profiles.

So in other words, if we just go back a couple of steps, remember the account ICP metrics and the Persona ICP metrics and the qualifying criteria on the base of those.

We now are going to.

Over here now talk about sam, which is the service Addressable markets.

And this is what we will be calculating for the purpose of this video.

So, and for the purpose of this module.

So we're now trying to establish what's the total markets realistically that we can capture.

assuming that we are just targeting our company level Personas and our Persona level Personas and just for a bit of general knowledge, or for you to share as a fun fact with a mate of yours in the pub or over a coffee or something of that sort in case, if you're wondering about some other fancy acronyms, there is also this other acronym which which is som, Serviceable Obtainable Markets.

And that's just the size of the sum that you can realistically convert.

And the reason that we don't want to do that, like basically this will be the sum right down here.

and that's basically like the like the smallest parts of the total addressable market.

So that assumes that out of the sum SOM is like the market that we actually end up converting as customers.

But spoiler alerts, we don't know who these customers will be.

So you'll be silly to call this SOM mapping, because you know, that assumes that we already closed them as our paying clients.

So just as a quick recap in case, if you don't have a headache just yet, TAM is the entire market opportunity.

SOM is what you are actually going to capture in the market.

And then SAM is like the realistic market for you.

So we want to be sizing the realistic market which is the sam.

And if you're getting started with outreach on behalf of a company, forget about the total addressable market.

I mentioned this a couple of times.

You should mainly focus on the sam.

Right?

and once again I can talk about this all day long.

Three main reasons for this.

First reason is because the TAM just includes companies like Google and Facebook which are less realistic to land as your first clients.

SAM is a lot more realistic when it comes to that.

SAM is a lot cheaper to source because it's so much smaller than the total addressable markets.

And then finally it's a lot easier to establish patterns, if you're just looking for patterns amongst like I don't know, 30% of the market with the SAM rather than the TAM because obviously SAM is smaller.

So it's easier to find patterns, when there is like less companies or less people that you're looking at.

and super simply put, I'm now going to walk you through the seven step process in order for you to analyze and create your service addressable market.

I don't expect it to be super, super straightforward, but I'm going to try and make myself as clear as possible.

So if you have any questions in the meantime, after this, as always, just drop me a question underneath this video inside of the course, platform for instance and I'll be more than happy to answer any questions.

So the first step to define your service addressable market you would need to just answer all of these questions.

Most of these you already answered before.

So I guess you can just copy and paste your company level and Persona level OCP metrics.

So like what industries are you selling your products into?

That'll be the top three industries.

What geographies are you selling into or are the languages spoken in that market?

Because you know, a lot of the time right now, you can localize it to different markets but just make sure if you know, if you're selling it in Spanish or whatever, you can add other languages.

What are the business model?

like the types of businesses that you're selling to is important for you to sell it only to B2B businesses, B2C direct to consumer because that, you know, that cements the market quite a lot for a lot of companies.

unless you're selling like a Grammarly chrome extension, in which case you know you can sell it to everyone.

so that's quite important to answer.

And then is there preferred revenue bracket or employee count?

You can select that as well.

is there any way that we can measure the willingness to pay or budget amongst the companies that are good fit for your products?

once again that's quite important because for some businesses, for example, you need to know that that business is already spending a lot on paid ads, which you can do by scraping the Facebook ad library for instance.

and I've done that before so I know that that's possible.

And yeah, so over here it's important for you to write any sort of qualifiers.

I realize that will be a bit of repetition compared to before.

And by the way you could do all of this and follow along doing all of this inside of module 3.

So you will fill in the table, define your SAM, and then all of these are separate tasks in this module as well.

and then moving on, do our target companies within the sam user specific technology we would need to write down the technologies we need to write down over here what kind of data points we want to capture for each one of these companies, like email addresses, LinkedIn, profiles of people, phone numbers.

A lot of you, I guess, wouldn't really want to do phone numbers because phone numbers are so expensive to find these days.

and then problem intensity, so the problem intensity is, you know, like specifically what are the headaches that market faces.

I realize this is very similar to what we've done already, but it's quite important because in a second I'll be showing to you like the rest of the steps and you will see how they puzzle together, in order to create like a good, serviceable, addressable market for you.

And then finally over here, to prevent you just mass blasting and pitch slapping every single prospect possible, it's very important for you to exclude some companies from outreach as well.

So in other words, over here, ask yourself what companies are a bad fit for our services.

So in this case over here you can just put whatever, like non government organizations, charities, you know, companies with less than like two employees.

And trust me, like it may seem common sense, but you would still rule out a lot of businesses.

And that makes your SAM a bit smaller, which is good, meaning that it's cheaper for you to then scrape it later down the line as soon as you answer some of these questions.

It's just a matter of noting down your top three industries in the SAM because we want to avoid having more than three industries at a time because it wouldn't fit our 8020 Pareto mindset.

In other words, you're testing any sort of code outreach later down the line, you don't want to be testing more than three industries at a time because it's the same as me trying to juggle more than three balls at the same time.

I can't juggle it in two.

So imagine trying, juggling four industries or something.

It's really, really difficult.

So just write down your top three indust.

And then after that eyeballing the sam, it's just for pure sanity, it's really not that difficult.

But typically what I recommend is going into ChatGPT and you can select the research grade intelligence model.

Or if you're in Claude, I'm sure you can figure that one out for yourself.

It's any sort of AI model inside of your LLM of choice that has access to the Internet.

And you could basically just say, you could basically import all of these criteria and just say like, hey, I want to find out, like my serviceable available market based on this criteria.

Tell me how many companies are in my sam, roughly based on your expert Calculations give me a range and then after that you can just copy and paste a bunch of info.

now the idea behind this, it's not to give you a scientifically accurate answer, it's just to give you a rough idea.

Are we talking about tens of thousands, hundreds of thousands, millions of companies?

Because the main idea after that is when you see that amount of companies you can then figure out how to segment it.

And we'll talk about this in a second.

So for example, I am selling two roofing businesses in the UK with 50 plus employees and I guess there wouldn't be that many roofing businesses with 50 plus employees.

since I don't have the time to use Pro here and I don't want to be spending like a bit of time on this, I'm just going to pause this one.

but if you switch to the instant model, the one that instantly replies, I know for a fact over here if I just click on chat, it should now give me a rough range, as a part of the answer.

So I'll come back to this in a second.

But the main idea behind this, if we just go back here after answering all of these questions above, it's important to just eyeball the service addressable market so you know how many people more or less are in that.

So in this case it will tell me.

Total roofing businesses in the UK are 12,000.

Business size distribution more or less is, you know, There are about 46,000 businesses across all industries when it comes to roofing.

And then it just gives you like a lot of estimations.

But in this case it tells me that, you know, if I'm selling to roofing businesses there will probably be about 500 companies maximum with 50 plus employees.

And this is the kind of range that we need to know because then it's a matter of okay, we have 500 companies.

What kind of segments do we break this outreach testing into?

later down the line because the next step, and by the way, you have this prompt over here inside of the slides.

So all you need to do is head over to the gamma slide, you can copy and paste this exact prompt and it will tell you the exact places of where you can actually source the, these companies as well later down the line.

So this is really, really important.

I can actually give you an example from today.

I've just done this earlier today as well where it's niche lead sources.

I think it was this search that I ran.

and you can see that if you use that prompt it also not only does it give you, like, how many roofing companies there are, it also gives you, like, where you can find them.

Why, like what database you can find it in.

Why that database is a good fit for your ideal client profile, what fields you can capture from that database if it's publicly available, if you could use a specific AI model to scrape it.

And don't worry, this is too complicated.

I'll show you later on how you can scrape a lot of this information.

It gives you a note and then you can even click in and then it will then take you to the exact database that could be useful in order to find, some of the companies in your service addressable market.

Now, I understand this could be somewhat confusing, but let's just take a step back.

What we've done so far is we answer the questions about what our service service addressable market is at the top over here.

after that we made a note of the top three industries.

We now eyeballed the service addressable market, copied and pasted this prompt into ChatGPT.

It now told us the different lead sources.

If we were to go out there and find the lead, and find the companies and the people, like, these are some databases that we may want to check out.

And this would not include like the typical databases like Apollo or LinkedIn, sales navigator.

This would be more like unconventional databases.

and it wouldn't be a hundred percent accurate.

But the idea is just to have a ballpark idea of the number of companies and where you may be able to find them.

Right?

and then over here afterwards, you can just type in what your market size according to ChatGPT is or according to Claude or whatever random thing, that you're using.

So over here you could just estimate the size of the service addressable market.

And then at the very bottom here, you just write down your answer.

How big your market size actually is.

The main idea after that is after we know how many companies there are more or less in the market.

If it's tens of thousands, hundreds of thousands or whatever, we can then break it down into segments.

Any market can be broken down into different segments.

And here are the five most common ways to break down the market.

The first way that you can segments the sam.

And let me just draw, the SAM again.

So in this case, and I promise, like, I don't want to annoy you with my drawings, but say this is the sam, right?

There are different ways you can segment the sam, right?

So like, what we're Trying to do here is we're trying to segment it so we can test all of these different.

So this could be like 1, 2, 3.

I know it looks like a pizza, but the whole idea is like we want to test all of these seven segments within the market because it's very hard to test like it's very hard to send one message to the whole market.

But it's quite easy to break this down in this case as I show you in the first example here, into sub industries.

So imagine you're selling into the financial services industry.

the easiest way to break down the if like your service addressable market is just financial services, you can break that down into sub industries like fintechs, physical banks or companies that issue cards.

Right, for example.

So this could be like banks, this could be like fintechs, whatever.

I don't want to spend forever writing this.

This could be fintechs, this could be banks, this could be some other sub industries.

So that's one way that you could break down your service addressable markets.

and this is super useful, worth noting to break it down into such sub, sub segments, like sub industries, in most cases because you can have more precise messaging depending on what sub industry they're in.

Because if you say like, hey, I noticed you have 23 like physical bank locations and that typically brings up problem A and B.

That's more personalized than you then going after fintechs and saying hey, I noticed you just got, you just applied for a bank license.

but right now you're just operating as a fintech and you have to use this other bank's bank license for your remittances for instance.

Right?

So sub industries are really, really good for most for most segmentation tactics, especially you know, if, if the actual in, if it's like one super big industry that you want to break down into smaller sub industries.

So that's one way that you can test out your messaging and all of that good stuff.

Next up we have the customer size.

So just for a bit of context here, if your target audience may vary from solopreneurs to enterprise clients, you may break down your SAM into some of these customer segments.

So you may want to break down the market into like enterprise clients based on a specific headcount, mid market based on a specific headcount, startups, SMBs, one man bands and solopreneurs.

That's just an example.

But once again that way you can just like break down The SAM into those chunks and then test out these chunks based on headcount.

I understand this is not like revolutionary right now, but that means that in this case you could basically source five different lists and that will be your entire service addressable market.

Right.

So what I recommend is you start by testing one industry when it comes to outreach.

In that case you can break down that industry into sub industries and that's like three or five different campaigns with five different sub industries.

your next hypothesis could be why not break this down based on customer size?

So in that case you can then do both a mix of sub industries and customer sizes.

So like fintechs, that are sub 50 employees.

Right.

So you can kind of like stack them, one segmentation method on top of the other.

But for the time being let's just get a good grasp of the individual segmentation techniques.

Next up, we can also segment based on geography.

So your SAM could be spread across many countries, states or some other geographies.

So you can do one for California, one for Texas, one for Wyoming.

That's something that we've done for quite a few clients that sell in the US to like brick and mortar for instance, because a lot of them do regional targeting depending on the states and we've done like campaigns where we test state A against state B and so on and we just see what the differences are in response rates.

up we can test based on customer stages and customer maturity.

This is a bit different to you know, the customer size per se, but you might have a bit more, a bit of correlation with that as well.

So in this case we can just test like option A, these companies are bootstrapped, option B, these companies are VC backed.

and we, we're trying to evaluate whether our revenue attribution tool, for instance, appeals better for bootstrapped companies that are more frugal with money or if revenue attribution is more important for VC backed companies that for whatever reason, you know, have more VC pressure.

Well not for whatever reason, they have more pressure from investors and hence you know, they need to get better at attributing their revenue.

right.

So it's very important.

Like if, let's say if you're selling fundraising services, chances are it's quite a good way like you could reach out to VC backed companies saying hey, we'll help you raise more funds.

Or to bootstrapped companies saying hey, you're probably going to die soon.

It's very hard to be bootstrapped these days.

Like we want to help you with fundraising, right?

So that's one way that you can split test the market as well.

Moving on, we have segmentation method, number five for some service addressable markets we may segment based on the problems that you solve for the service addressable market.

So you could basically segment it rather than like allowing the market like rather than you segmenting based on the actual companies and the people in the markets, you can segment it based on the problems that you're solving.

So in other words, instead of being worried about like the different filters and stuff, you can do one campaign testing transaction fees problems where like the only every single message just talks about transaction fees and how much of a headache that is.

You can have another campaign that just talks about exchange rates and you know the challenges that that poses.

You can have another one for long payout periods and then another one for multi entity reporting.

And this should, this should only be done if the problems are not mutually exclusive.

In other words, if your product solves transaction fees and exchange rates together, it's pointless to just test them out as two separate campaigns.

but the main gist here is just to tell you like, hey, you can basically establish your ideal client profile on a company and Persona level, make a list of your top three industries, eyeball the number of companies in Those industries, get ChatGPT to research some of the ways that you can find those, like where you can find those leads.

And don't worry about it for now because we'll be talking later on about like the best databases depending on the industries and geographies they are going after.

you then just write down your total SAM market size.

You can then break down your total addressable market into segments.

Because the main gist of this is in later modules when we start automating code outreach.

You want to always be AB testing.

So in other words you want to send in campaign A, you want to send emails to fintechs campaign B, to physical banks, campaign C, to issuers of credit cards A and that way you can come to a conclusion of like hey, fintechs are more responsive because you know they're more techy than physical banks so we're going to double down on them.

Alternatively, like customer sizes, you could see that you're getting more replies from startups so you might double down on that.

or geographically speaking you may find that some regions or states or cities are more responsive.

so you get the idea.

The main gist of this is first of all to understand the service address or market, like the differences between some of these keywords more on like a business level.

Because I think a lot of the time, like there is not much business acumen involved in sales a lot of the time.

And then you wonder why, you know, why you're not able to break down the market and so on.

And I think it's just quite important to understand the differences between sam, Salman, Tam, I know I'm going down a rabbit hole of just chatting forever in this video.

But the gist of it is quite simple.

We go through all of these steps, we fill in all of these tables and then after that you go and figure out how to segment your SAM based on those different segmentation tactics.

It's completely up to you to come up with three or four segments.

And by that point you have the SAM identified.

The size estimated, is broken down to three to four segments.

And then it's time to match the segments to a specific Persona.

So in other words, let's say we're going after fintechs.

What's the Persona that we want to reach out to in in fintechs?

Right.

And as an example for education, let's say the segment.

One of the segments is K12 schools in America.

The Persona for that is principal.

If we're going after higher education, the Persona for that will be the dean of admissions.

If we're going after test prep, once again we can go after the dean of admissions.

And then if we're going for like if the segment is corporates, learning and development people, we probably want to be reaching out to the chief HR officer at those companies.

This is just a quick example.

I hope it's really not that confusing on your side.

And after we break down the service addressable market into key industries, segments and Personas.

So the way it basically should be is that you have the industry, you have the segments of that industry.

So like one of these segments here, right?

And then on top of that you have the Persona.

And it should be as simple as you just having industry.

And then you can fill in the segment and the Persona.

And then after we broke down the SAM into the industry segments and Personas, we can write down the angle.

So what I mean by angle is how we want to position our tool for that segment and for that Persona.

Because, as an example over here, let's say we're selling education to coach, we're selling to the education industry.

The segments within the education industry could be coaches like Sleep coaches, mental health coaches, mindset coaches.

And let's say we have an all in one tool to schedule sessions, track clients progress and get paid using one tool.

That could be a good selling point for coaches.

Right.

But if we're testing another segment like K12 schools, they don't care about being able to track clients progress and get paid and schedule sessions because they probably have their own like K12 whatever software for like they're all public schools or private schools are using in the states.

In that case they just.

When we email the principal, the angle could be emphasizing the high admission rates to university.

Right.

And that could be something that appeals to them and that could be basically us trying to test like each angle is a different way to bring across the value proposition for the segment and for the Persona.

So I hope this really makes sense to you.

If it does, just start off by filling in the industries or with the segments, Personas and angles all over here.

And actually don't fill it in in the gamma slides, but you can just follow along inside of this handbook over here.

Just write it all down for yourself.

If you have any questions in the meantime, let me know.

and more than that, you could also just upload a bunch of information into the GPT that I've created for you for the course.

And then basically as a result of you uploading the information about your business, you can then basically do all of this service addressable market stuff for you.

So we can calculate it, it can fill in all of this stuff for you.

Just make sure to upload a bunch of information about your business and it should be able to help you out.

But bearing in mind that you know, AI makes mistakes and all of that good stuff.

so based on all of that, we can then start talking about sourcing the service addressable market, company hit lists and just to give you like a bit of a high level summary here.

So typically the way that campaign outreach works you have step one, which is on a company level, right.

And I know I'm really bad at writing, so I'm not even going to bother writing here.

so step one of any campaign outreach would be company level data.

So we need to go and source lists of companies.

part two after that will be like us sourcing people level data.

So in other words, like the people working at the companies, phase three typically will involve some sort of writing.

So I'm just going to like draw over here because our main goal in the third step of the campaign process is to do some sort of copywriting be.

It's like the exact messaging everything of that sort.

And then like there will be some other steps where we go about launching the campaign.

so that's the main idea by this.

I almost lost my voice by the end of this video.

So I hope that was worth it.

And I just very much encourage you for you to go ahead go and try out to segment your service addressable market and as soon as you do that, just drop me a line if you have any questions or if you want to just double check and to triple assure yourself that you're doing that correctly.

And in the next module we'll now start talk, start talking about code, outreach, messaging.

I look forward to seeing you in the next module, and you know, teaching you some of this fun stuff that I've learned over the last few years.

If you have any questions, as always, my DMs are open and I'll see you in the next video.