How do you calculate the potential value of your market?

Many B2B companies draw up marketing plans based on revenue targets, past results or the ambition to get “more leads”. That sounds logical, but something is missing. You don't know how big the market really is, how much value it holds and which part of it is even open to your solution right now. 

If you don't map your market, you soon end up steering on assumptions. Sales targets companies that may not fit at all. Marketing creates campaigns for an audience that's too broad. Budgets are allocated without it being clear where the most commercial room lies. 

Calculating the potential value of your market helps you make sharper choices. You see how many companies could in theory become customers, which part you can really serve and which part you can realistically win within a given period. In this article, we explain how to do that with TAM, SAM and SOM, how to calculate the active market size and how to translate these insights into a better B2B marketing strategy. 

Why market potential is the foundation of your B2B marketing strategy

A good B2B marketing strategy doesn't start with a campaign, channel or content calendar. It starts with the question of exactly who you're there for. Only when you know which market you want to reach can you decide which message, channels and resources fit. 

Without insight into your market potential, you quickly aim too broadly. You try to be visible to all sorts of companies, while only some of them really fit your offering. That leads to generic content, less focused campaigns and sales conversations with accounts that have little chance of success. 

By calculating your market potential, you make your commercial playing field concrete. You know which companies fall within your target audience, roughly how much revenue they represent and how much market share you already have. For B2B companies with long buying processes, that gives direction to your marketing budget, sales approach and growth targets. 

What do you need to calculate the potential value of your market?

Before you start calculating, you need to decide exactly what you mean by “your market”. Many companies start too broadly. They look at a sector, region or total number of companies, but forget that by no means every company in that group can become a good customer. 

So start with one clear product-market combination. Which service or solution is central? For which group of companies do you solve a concrete problem? And which characteristics make a company a suitable customer? 

Next, you need a few figures: the number of companies in your target audience, the average customer value, your region and the criteria for your ideal customer. In B2B, you look at things such as sector, company size, revenue bracket, growth stage, maturity level and the decision-making unit. 

The aim isn't to find one perfect number. The aim is to make better-founded assumptions, so marketing and sales focus their time and budget on the market with the most commercial room. 

TAM, SAM and SOM: from total market to obtainable market

TAM, SAM and SOM help you look at your market in three layers. You start with the total market that's relevant in theory. Then you narrow that market down based on what you can really serve. Finally, you determine which part of it you can realistically win within a given period. 

This way of calculating stops you from confusing the total market with achievable revenue. A market can be large on paper, while the part you can reach now is much smaller. It's exactly that distinction that makes the calculation useful for marketing and sales. 

What is TAM?

TAM stands for Total Addressable Market. This is the total market that could in theory buy your product or service. So it's the maximum market, without taking into account your current capacity, competitive position or practical limitations. 

The formula is simple: 

TAM = total number of potential customers x average customer value 

Say you sell software to manufacturing companies in the Netherlands. There are 8,000 manufacturing companies that could in theory work with your solution. The average annual value per customer is €12,000. Then your TAM is €96 million a year. 

That figure doesn't mean you can win €96 million. It only shows how big the total pond is. The TAM is therefore mainly useful for deciding whether a market is big enough to invest in seriously. 

What is SAM?

SAM stands for Serviceable Available Market. This is the part of the TAM you can really serve with your current proposition, region, pricing and capacity. Companies that are too small, too large, outside your area or not a good fit in terms of substance drop out here. 

The formula is: 

SAM = number of companies that fit your ideal customer profile x average customer value 

Of the 8,000 manufacturing companies, for example, 2,000 turn out to fit your ideal customer profile. They're the right size, have sufficient budget and have a problem your solution solves well. With an average annual value of €12,000, your SAM is €24 million a year. 

The SAM sharpens your market. This is the market marketing and sales can focus on structurally. Not every company in this group will become a customer, but together they form the core of your commercial playing field. 

What is SOM?

SOM stands for Serviceable Obtainable Market. This is the part of your SAM you can realistically win within a given period. Here you take into account competition, brand awareness, budget, sales capacity and timing. 

The formula is: 

SOM = realistically winnable share of your SAM x average customer value 

Say you can realistically win 5% of your SAM over the next 24 months. With a SAM of 2,000 companies, that's 100 customers. With an average annual value of €12,000, your SOM is €1.2 million a year. 

The SOM is the most useful figure for your commercial planning. From it, you can derive targets for marketing, sales and account development. You see how many customers you need to reach your growth target and whether that fits the market you can reach. 

The 95/5 rule: how many buyers are really active right now?

Once you've calculated your TAM, SAM and SOM, the market can sometimes look big. Yet there's an important nuance. Not every company in your market is actively looking for a solution right now. In many B2B markets, only a small part of the target audience is currently busy buying. 

That's why the 95/5 rule is useful. It assumes that around 5% of your potential market is actively looking for a solution at this moment. The other 95% isn't in the market right now. Those companies may become customers later, but have no direct buying intent at the moment. 

This insight changes how you look at marketing. If you focus only on direct enquiries, demos or quote requests, you're mainly targeting that small active group. There are certainly opportunities there, but you're also competing with many other providers using the same keywords, ads and sales approach. 

The bigger opportunity lies in combining Demand Generation and Demand Capture. You capture existing demand, but also build recognition and trust among the companies that will only start moving later. 

Demand Generation

Demand Generation focuses on the market that isn't actively searching yet. You're not trying to get an enquiry straight away, but building visibility, trust and recognition. You do this with content that helps your audience understand a problem better. 

Think blogs, LinkedIn posts, videos, newsletters, webinars and cases that don't sell straight away, but do show how you see the market. You share insights, name misconceptions and show which choices companies can make. That way you become known among the right group, even before there's a concrete need to buy. 

If you know which companies fall within your SAM, you can use Demand Generation in a much more targeted way. You don't need to reach the whole market. Above all, you want to be visible to the companies that will be commercially valuable in time. 

Demand Capture

Demand Capture focuses on companies that are already actively searching. They compare providers, read service pages, search on Google or click on ads with clear buying intent. This is where you want to be easy to find and make clear quickly why your organisation is a good fit. 

SEO, SEA, retargeting, cases, commercial landing pages and clear calls to action are useful here. You respond to existing demand and make it easy to take the next step. 

Demand Capture works better when Demand Generation has already done its job. A company that already knows your brand, has seen your vision before and has built up trust comes in better prepared. The conversation with sales then starts at a different level. 

How do you calculate the active market size?

Your active market size is the part of your market that actually starts moving within a given period. That's not the same as your full SOM. You need to take into account contract length, replacement moments, budget cycles and the average period after which companies choose a supplier again. 

A simple formula is: 

Active buyers per period = SOM in number of companies / average replacement cycle 

Say your SOM consists of 2,000 companies. On average, companies choose a new supplier once every five years. Five years is 20 quarters. That means around 100 companies are active in the market each quarter. 

That figure helps you set more realistic expectations. If only 100 companies are active each quarter, you can't expect a campaign to deliver hundreds of good enquiries every month. It then makes sense not to steer only on direct leads, but also to work on the market that will buy later. 

You can therefore divide your target audience into two groups. The first consists of active buyers; that's where you aim Demand Capture. The second consists of future buyers; with them, you use Demand Generation to build recognition, trust and preference. 

Which data do you use to calculate your market value?

Calculating market potential starts with assumptions, but you want to back them up as well as possible. In B2B, you can often find out fairly precisely how many companies fall within your target audience, especially if you work with criteria such as sector, company size, region and job roles within the DMU. 

Use sources such as LinkedIn Sales Navigator, the Dutch Chamber of Commerce (KvK), Statistics Netherlands (CBS), your CRM and sales conversations. LinkedIn helps you find companies and decision-makers. KvK and CBS provide broader market data. Your CRM shows which customers deliver the most value and which deals fit best. 

Supplement that with signals from the websites of target companies, such as vacancies, growth announcements, technology pages or cases. That way you don't just use data to collect numbers, but above all to make better choices: which companies really fit you, where is urgency arising and where can your solution add the most value? 

From potential market to paying customers

A TAM or SAM list doesn't generate revenue on its own. The value only comes when marketing and sales work that market in a targeted way. That calls for a clear approach in which audience, message, content, distribution and measurement all fit together. 

At Partout, we translate this into a step-by-step B2B approach. First, you map your ideal customer sharply. Then you formulate a clear vision and message. Next, you build a content framework and set up a Demand Generation machine. Finally, you measure which signals show that your market is starting to move. 

1. Defining your ideal customer

Defining your ideal customer goes further than a persona or audience description. You look at companies where your solution genuinely adds value. What size are they? Which sector are they in? Which maturity level suits your approach? And which problems need to be present before your solution becomes relevant? 

This step determines which companies move from TAM to SAM. You make your market smaller, but also sharper. That isn't a limitation. On the contrary, it makes sure marketing and sales are pulling in the same direction. 

2. Formulating your point of view and message

Once you know who you want to reach, you need to decide what you're going to say to that market. A good message isn't just about what you deliver. It shows how you view your audience's problem and why your approach makes sense. 

A point of view helps with this. You take a clear stance on the market, the problem and the solution. As a result, you're seen not just as a supplier, but as a party with its own perspective on the issue. 

3. Developing a content framework

Next, you translate your message into a content framework. You decide which themes keep coming back, which questions your audience has and what information decision-makers need at different stages of the buying process. 

In B2B this matters because several people influence the decision. A board member, marketer, buyer or technical specialist doesn't look at the same information. With a good content framework, you make sure each of them finds content that matches their question. 

4. Setting up the Demand Generation machine

With your market, message and content foundation in place, you can become structurally visible. You don't do that with a one-off campaign, but with a steady rhythm of content and distribution. LinkedIn, SEO, ads, email and website content reinforce each other when they're built on the same market choices. 

Your TAM or SAM list can be put to practical use here. Think LinkedIn targeting, retargeting, account selections for sales and content planning per segment. That way your market calculation doesn't become a spreadsheet that disappears, but a working document for marketing and sales. 

5. Measuring, monitoring and optimising

With a market-focused B2B strategy, you measure more than leads. Leads are valuable, but they don't tell you everything about how your market position is developing. You also want to see whether more companies are searching for your brand, viewing your content, returning to your website and getting in touch on their own initiative. 

So look at signals such as branded search, website visits from target accounts, content engagement, hand-raisers, the quality of conversations and sales pipeline velocity. These signals show whether you're becoming better known within the market you want to win. 

How do you decide what a potential customer may cost?

If you know how much your market is worth, you can also better determine what a potential customer may cost. Many companies base their marketing budget on last year's. That's understandable, but not always logical. It's better to work backwards from customer value, margin and desired growth. 

Say a customer brings in an average of €30,000 a year and stays a customer for three years. Then the total customer value is €90,000. If you know which margin you want to keep and how many opportunities become customers on average, you can work out how much you can responsibly invest in marketing and sales. 

This helps you look at costs differently. A click, lead or campaign can sometimes seem expensive if you only look at the short term. But if customer value is high and the sales cycle long, investing in visibility, content and brand preference can make perfect sense. 

In B2B especially, not every marketing euro has to lead directly to an enquiry. Part of your budget goes to capturing active demand. Another part goes to building preference among companies that will only buy later. The balance between the two depends on your market, customer value and growth targets. 

How do you calculate your current market share?

If you know how big your market is, you can also calculate your current market share. You can do that based on the number of customers or on revenue. Both angles provide useful information. 

The formula based on customers is: 

Market share = number of current customers within your SAM / total number of companies within your SAM x 100 

Say your SAM consists of 2,000 companies. You currently serve 80 companies within that market. Then your market share based on customer numbers is 4%. 

You can also calculate it based on revenue: 

Market share = current revenue within your SAM / total market value of your SAM x 100 

If your SAM has a total value of €24 million and you generate €1.2 million in revenue from that market, your market share based on revenue is 5%. 

This calculation shows how much room there still is. Perhaps you already have a strong position in one segment but hardly any presence in another. Or you have many customers but a relatively low customer value. Insights like these help you make sharper choices for growth. 

Common mistakes when calculating market potential

Calculating market potential seems simple, but things easily go wrong. Many companies start too broadly, for example with “all companies in the Netherlands”. That doesn't give you a usable picture of the market. You need a concrete product-market combination to make meaningful choices. 

TAM is also often confused with achievable revenue. A large total market doesn't mean you can win that market within two years. For that, you need to look at SAM, SOM, competition, timing and your own capacity. 

Another mistake is that companies don't take buying moments into account. In B2B, organisations are often tied to contracts, budget cycles and internal decision-making. So a company can be a perfect fit and still not be ready to buy. 

That's why market potential only becomes valuable when you translate the calculation into choices. Which audience gets priority? Which message fits it? Which channels do you use? And how do marketing and sales ensure follow-up together? 

Reach your ideal audience with a market-focused B2B approach

Calculating the potential value of your market gives you more control over growth. You see how many companies could in theory become customers, which part you can really serve and how many buyers are active right now. 

For B2B companies with long buying processes, that's the foundation for a better marketing strategy. You're not just chasing the small group of companies that want to buy now, but also building visibility and trust among the companies that will start moving later. 

That makes market potential a practical basis for choices about budget, audience, content and sales follow-up. Want to know how big your potential market is and which companies fall within your ideal target audience? Partout helps you map your active buyers and build a concrete B2B marketing strategy on that basis. 

Frequently asked questions about calculating market potential

1. Can you calculate market potential if you don't have much customer data yet?

Yes, but then you work more with external data and assumptions. Use, for example, LinkedIn Sales Navigator, Statistics Netherlands (CBS), the Dutch Chamber of Commerce (KvK) and industry data to estimate your market. Then test those assumptions as quickly as possible through sales conversations, customer interviews and early campaign insights.

2. What do you do if your market is large on paper but you get few enquiries?

Then the problem usually isn't just the size of the market. Also look at your positioning, message, visibility and timing. A large market delivers little if your audience doesn't know you yet or doesn't understand why your solution is relevant.

3. How do you know whether a market segment is interesting enough?

A market segment is interesting if there are enough suitable companies, the average customer value is high enough and the problem is clearly felt. Also look at reachability. A segment can seem commercially attractive but be hard to work if your audience is difficult to reach or feels little urgency.

4. Should you focus on the biggest market or the best-fitting market?

In B2B, the best-fitting market is often more valuable than the biggest market. A smaller audience with clear urgency, good customer value and a strong fit usually delivers more than a broad market in which your message is less sharp.

5. How do you use market potential in your annual plan?

Use market potential to underpin your choices about audience, budget, content and sales capacity. You see which segments get priority, roughly how many active buyers you can expect and how much attention you need to give to demand creation for the longer term.

6. What does market potential tell you about your sales targets?

Market potential helps make sales targets more realistic. If you know how many companies fall within your SOM and what share of them is likely to be active, you can better estimate how many conversations, opportunities and customers are achievable within a period.

7. What if you serve several target audiences?

Then calculate the market potential per audience or product-market combination. That way you avoid lumping everything together. For each segment, you can determine where the most value lies, where the best fit is and what marketing and sales should focus on first.

8. How do you stop market potential from remaining a theoretical exercise?

Link the calculation directly to actions. Make a list of suitable accounts, decide which content is needed per segment and agree how sales will follow up on signals. Market potential only becomes valuable when marketing and sales use it in their day-to-day decisions.