total addressable market
Total Addressable Market is the full size of the opportunity if every single person who could buy your product actually bought it.
In plain English
At the Alaba market, a phone accessory seller once told me she sells screen protectors for every phone brand under the sun, but if you ask her how big her market really is, she will point at everyone in Lagos holding a smartphone, cracked screen or not.
That number she is pointing at, everyone with a phone who might one day need a screen protector, is her Total Addressable Market. It is not how much she sells this month. It is the size of the whole pond she is fishing in, whether she has caught those fish yet or not.
Investors ask founders about this because a small pond, no matter how well you fish it, will only feed you so much. If you are building an app that helps Nigerian landlords collect rent, your addressable market is every landlord in Nigeria with property to rent out, more than the ones already using your app.
A founder in London building software for independent coffee shops might size their market by counting every independent coffee shop in the United Kingdom, then ask how much each one could realistically pay per year. Multiply those two numbers and you have a figure to defend in a pitch room.
It gets tricky because ambition can turn into exaggeration. Saying your market is every human being on earth with a mouth to feed sounds impressive until someone asks how you plan to reach even one percent of them.
The honest version of this number is not meant to flatter you. It is meant to show that the opportunity is worth building for, and that there is room to grow long after your first hundred customers.
A startup selling solar inverters estimates that there are 8 million Nigerian households without reliable electricity who could afford one. If each household would spend ₦150,000 on average, the Total Addressable Market is roughly ₦1.2 trillion, even though the startup itself might only capture a tiny slice of that in its first few years.
Questions people ask
How is Total Addressable Market different from actual sales?
Total Addressable Market is the ceiling, the maximum possible if you captured every buyer everywhere. Actual sales are what you have managed to win so far, which is almost always a much smaller slice of that ceiling.
Why do investors care so much about this number?
A business chasing a small market can still be profitable, but it has a natural limit on how big it can grow. Investors want to know there is enough room for the company to expand for years without running out of new customers to reach.
Can a small business owner in Nigeria use this idea too?
Yes, even a food vendor can ask how many people in their local area eat lunch out on a working day, and use that number to decide whether to open a second branch or stay put.
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