Total Addressable Market (TAM) refers to the potential revenue that a company could generate if it captured all of its target customers within a given market. It is a way for companies to estimate the size of the market for a specific product or service.
TAM is calculated by multiplying the number of potential customers by the average revenue per customer. For example, if a company estimates that there are 100,000 potential customers for its product and that each customer will generate $100 in revenue, the TAM for that product would be $10 million.
TAM is used by companies to help determine the potential profitability of a product or service, as well as to help prioritize investment decisions. Companies may also use TAM to determine their market share, which is the portion of the TAM that they currently capture.
TAM is a useful tool for companies because it helps them to understand the potential size of their market and to make informed decisions about product development, marketing, and sales strategies. However, it is important to note that TAM is only an estimate and may not accurately reflect the actual market size or revenue potential.