TAM, SAM and SOM, one line each
TAM, the total addressable market, is everything the product could sell if every possible customer bought. SAM, the serviceable available market, is the share you can actually reach with your geography, segment and model. SOM, the serviceable obtainable market, is what you can realistically win in the first years, against the competition that is already there.
Top-down, bottom-up, and why you need both
Top-down starts from the total market and narrows it through filters: geographic share, segment share, addressable share and penetration rate. Bottom-up starts from the other end: how many customers you can reach, at what price, and how often they buy.
Each method has a typical failure. Top-down flatters, because a small percentage of a big number always looks achievable. Bottom-up can be too cautious, or blind to the market around it. The triangulation view puts the two side by side.
When the two numbers don't meet
That is the useful moment. A large gap between top-down and bottom-up almost always points to one assumption: a price that is too high, a penetration rate borrowed from another market, a segment that is smaller than it looked.
The calculator runs base, best and worst cases over a five-year horizon with market growth, and exports a full report once the numbers agree.
An example
A B2B software company targets Italian manufacturers with 50 to 250 employees. Top-down, a €2 billion European market narrows to €180 million in Italy and €40 million in the right segment. Bottom-up, 4,000 reachable firms paying €6,000 a year, with 5% buying by year three, gives €1.2 million.
The gap is the conversation: which of those numbers is the wishful one? (Illustrative figures.)
Why these tools exist: the case for de-risking before you build