Understanding TAM, SAM, and SOM with a Real-World Approach

In the world of startups, one of the most critical steps in building a business is understanding your market potential. This involves assessing your TAM, SAM, and SOM—key metrics that help entrepreneurs quantify opportunities, strategize growth, and set realistic goals. Let’s explore these concepts with the help of makhana, a traditional Indian superfood that’s rapidly gaining global popularity.

Exploring Market Potential Through Makhana

Picture this: You’re an entrepreneur passionate about bringing makhana (fox nuts) to the forefront of healthy snacking. Inspired by the recent buzz around makhana and even Nikhil Kamath, Zerodha’s co-founder, who once stated its potential as a scalable business idea, you’ve decided to dive into the market. But how do you determine the size of the opportunity? Enter TAM, SAM, and SOM.

1.Total Addressable Market (TAM): The Big Picture

TAM is the largest possible market for your product, assuming there are no constraints. For makhana, this means considering everyone who could theoretically consume makhana globally.

For example:

• Health-conscious individuals worldwide looking for gluten-free, high-protein snacks.

• The global healthy snacking industry, which is projected to reach $152 billion by 2030 (Source: Grand View Research, 2023).

TAM gives you the maximum opportunity but doesn’t account for limitations like competition, geography, or resources.

2. Serviceable Available Market (SAM): Narrowing It Down

SAM is a subset of TAM and represents the portion of the market your business can realistically target based on factors like geography, product type, and audience demographics.

For makhana, your SAM might include:

• Health-conscious customers in India, where makhana is traditionally known and consumed.

• Niche markets in the U.S. or Europe interested in exotic, organic superfoods.

In numbers, SAM could be the Indian healthy snack market, valued at approximately ₹10,000 crores (Source: IBEF, 2022), or a portion of the global organic snack market.

3. Serviceable Obtainable Market (SOM): The Realistic Opportunity

SOM is the portion of SAM you can capture within a specific timeframe, considering your resources, marketing, and competition.

For example:

• If you’re starting with online sales, your SOM could be limited to Tier 1 and Tier 2 cities in India, where disposable incomes are higher, and e-commerce adoption is significant.

• With limited production capacity, you might target 1% of the Indian healthy snack market initially—₹100 crores.

SOM is where strategy meets practicality. It shows you where to focus your efforts to gain traction in your beachhead market.

Why Understanding TAM, SAM, and SOM Matters

Failing to understand these metrics can lead to unrealistic expectations or missed opportunities. TAM gives you the vision, SAM provides the focus, and SOM drives the action. Together, they ensure you align your resources with achievable goals.

Bonus Insight: Beyond the Numbers

While TAM, SAM, and SOM help quantify your opportunity, factors like your target market and product differentiation further refine your strategy. For makhana, identifying whether you’re targeting fitness enthusiasts, vegans, or millennials seeking convenience is crucial.

Conclusion

From the vast global market to your immediate, obtainable niche, TAM, SAM, and SOM are your compass for navigating the makhana business landscape—or any market. Whether you’re inspired by industry leaders like Nikhil Kamath or driven by a love for innovation, these metrics help you stay grounded while dreaming big.

For more marketing insights and strategies, subscribe to our newsletter. To take your brand to stellar heights, join us at Brand Stellar for cutting-edge digital marketing solutions.