TAM

TAM is a financial metric that businesses and investors may use to evaluate the market demand for a product, service, etc. By calculating the TAM, they can better understand the viability of a product, service, etc., and its revenue potential.

For example, a board game company may be interested in offering a new game to the public, but before it commits resources to producing, marketing, and selling it, it wants to determine its TAM. To do this, the company will likely evaluate the target market, current competitive landscape, consumer profiles, and the outlook for long-term growth.

Then, to calculate the TAM, the company may choose one of several methods. Options include:

• Consulting third-party research collected by analyst firms.
• Using its own research (bottom-up insights where they extrapolate to a wider context from local market data).
• Implementing value theory to estimate the value a product, service, etc., provides a user and how they can reflect that in the pricing.

While most people define TAM as "total addressable market," people may also understand it as "total available market."