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Defining market size using TAM, SAM, SOM

Short answer

SAM = 4,20,000 households × Rs 1,800 = Rs 75.6 crore; SOM = 4% of SAM = 16,800 customers, revenue Rs 3.02 crore per year.

Explain TAM, SAM and SOM. A startup plans a home-water-testing kit. There are 12,00,000 households in its target cities; 35% of them can afford and need the kit; one kit costs Rs 1,800 per year (subscription). The startup expects to capture 4% of the serviceable households in the first years. Estimate SAM and SOM in number of customers and in rupees per year.

Definitions

  • TAM (Total Addressable Market): total demand for the product if every possible customer bought it.
  • SAM (Serviceable Available Market): the part of TAM the startup can reach with its product, location and channels.
  • SOM (Serviceable Obtainable Market): the share of SAM the startup can realistically win in the near term.
+-----------------------------+
| TAM                         |
|   +---------------------+   |
|   | SAM                 |   |
|   |    +-----------+    |   |
|   |    |    SOM    |    |   |
|   |    +-----------+    |   |
|   +---------------------+   |
+-----------------------------+

Bottom-up calculation

Households in target cities = 12,00,000.

Serviceable households (SAM customers):

12,00,000×0.35=4,20,00012{,}00{,}000 \times 0.35 = 4{,}20{,}000

SAM in rupees:

4,20,000×1,800=Rs 75.6 crore (Rs 756 million)4{,}20{,}000 \times 1{,}800 = \text{Rs } 75.6\text{ crore}\ (\text{Rs } 756\text{ million})

Obtainable customers (SOM):

4,20,000×0.04=16,8004{,}20{,}000 \times 0.04 = 16{,}800

SOM in rupees:

16,800×1,800=Rs 3.024 crore (Rs 30.24 million)16{,}800 \times 1{,}800 = \text{Rs } 3.024\text{ crore}\ (\text{Rs } 30.24\text{ million})

Bottom-up estimates (customers × price) are preferred to top-down percentages because they rest on checkable assumptions.

Answer: SAM = 4,20,000 households = Rs 75.6 crore per year; SOM = 16,800 customers = Rs 3.02 crore per year.

✓ Answer checked by Claude Opus 5.5 (high effort)

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