Question 1

What do TAM, SAM and SOM mean?

Accepted Answer

Three progressively narrower measures of market size — **total addressable, serviceable addressable, and serviceable obtainable market** — used mainly in investor presentations and frequently misused there.

**TAM — total addressable market.** The total annual revenue available if you captured **100% of every possible customer** for the category, worldwide, with no constraints. A theoretical ceiling.

**SAM — serviceable addressable market.** The portion of TAM you could realistically serve given your product, business model, geography and segment. If you sell only in the UK, to businesses of a certain size, in a specific sector, SAM reflects those limits.

**SOM — serviceable obtainable market.** The share of SAM you could plausibly win in a defined period, given your resources, competition and sales capacity. This is the only one connected to your actual plan.

**The two ways to calculate it, and why one is much better:**

**Top-down.** Take an industry report, then apply percentages — "the global market is £50bn, we only need 1%". This is the approach investors dislike most, because the percentages are invented and the arithmetic is unfalsifiable. **"We only need 1%" is treated as a warning sign**, since it implies no view of how customers would actually be won.

**Bottom-up.** Count the actual customers, multiply by a realistic annual contract value, and build upward. "There are 40,000 UK firms of this type; at £3,000 a year that is £120m." Slower, requires real knowledge, and is far more credible **because it can be checked**.

**What these figures are genuinely for:** establishing that the market is **large enough** for the business being built. A VC needs a market that could support a very large company; a lifestyle business does not and should not pretend otherwise.

**Where they mislead:**

**Inflated TAM** by including adjacent categories you do not serve.

**Confusing market value with what you could charge**, particularly when displacing free alternatives.

**Ignoring that markets change** — the relevant market for something genuinely new frequently does not exist yet, which makes these figures close to meaningless and honest founders say so.

General information, not business advice.

Question 2

What are unit economics?

Accepted Answer

The revenue and costs attributable to a single unit — one customer, one order, one subscription — stripped of everything else. The question they answer is simple and brutal: does one of these make

Question 3

What is break-even analysis?

Accepted Answer

Working out how much you need to sell to cover your costs — the point at which the business stops losing money, before it makes any. The two cost types it depends on: Fixed costs do not change with

Question 4

What is a liquidation preference?

Accepted Answer

The right of certain shareholders — almost always investors — to be paid first when a company is sold or wound up, before ordinary shareholders receive anything. It is frequently the single most

Question 5

What are the realistic exit options for a business?

Accepted Answer

Fewer and less glamorous than the coverage suggests. The overwhelming majority of successful exits are trade sales, and several perfectly good outcomes are not exits at all. Trade sale (acquisition).

Question 6

Should you bootstrap or raise investment?

Accepted Answer

It depends far less on ambition than people assume and far more on whether the business has a structural reason to need capital before revenue — and on what you actually want the business to be. What

Question 7

What is the difference between gross margin and net margin?

Accepted Answer

Gross margin tells you whether the product makes money. Net margin tells you whether the business does. They answer different questions and are frequently confused when people quote "margin". Gross

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