TAM vs. whitespace opportunity?
hi guys - what exactly is the difference here? is whitespace a subset of TAM? so if TAM is $1B, whitespace might be $100M that's actually serviceable to a Company?
from what i understaND, TAM is the total revenue opportunity assuming 100% market share. so is whitespace the portion of that pie that is still available for a company to go get?
numerical examples would be super helpful
thanks so much
Look up TAM SAM SOM. Pretty common framework and should help answer your question.
Let's say you sell hotel management software. Any hotel with over 100 rooms can theoretically use your software, and there are 10,000 hotels that fit that description in the US. Of those 10,000 hotels you serve 2,000, your competitors collectively serve 5,000, and there are 3,000 that don't use any software yet. Average selling price (ASP) for the software is $1,000 per year
There's three concepts that matter:
TAM = Total Addressable Market. This is the full 10,000 hotels. Multiply by $1,000 ASP and your TAM is $10M.
Served market. This is the 2,000 you serve plus the 5,000 your competitors serve to get you to 7,000 total hotels. Multiply by $1,000 ASP and your Served Market is $7M.
Whitespace. This is the 3,000 remaining hotels that don't use any software yet. Multiply by $1,000 ASP and your Whitespace opportunity is $3M.
While we're at it, market share is calculated based off of served market. So if you have 2,000 hotels and the served market is 7,000 your market share is 2K/7K = ~29%
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