What is SAM?
SAM or Serviceable Available Market is the segment of the Total Addressable Market (TAM) targeted by a company’s products and within their geographical reach. You can think of SAM as the part of TAM that can actually be reached. Capturing the total addressable market is not usually feasible, at least not at first without significant marketing and growth. SAM lets a company know what portion of the market they are likely to capture given factors like geography and market competitors.
How To Calculate SAM
Here is how to calculate your serviceable addressable market. You need to determine the number of potential customers that would be a proper market fit for your product. Then, multiply that number by the average annual revenue expected from each individual customer in your market.
Example: A new smartphone application charges $100 a year for services. If there are 500 potential customers who would be a good fit. Then, the SAM for this scenario is $50,000.
Why Is SAM Important to Understand Before SBIR Proposals?
Understanding marketing and commercialization is a key factor in being successful in SBIR. This is true both of program success and success in receiving an award. While research and development is a cornerstone of SBIR there is also a strong focus on marketing and commercialization. Understanding SAM and including the figure in the commercialization section of the proposal demonstrates to the SBIR reviewers that you have the skills, and knowledge to make your product marketable.
Use SAM to determine what portion of the total addressable market can likely be considered potential customers. This income forecasting will be useful when the time comes to create the commercialization and market validation subsections of your SBIR proposal. It is important to demonstrate business acumen to the SBIR reviewers in addition to innovation and research skills. This can not be stressed enough. SBIR is about bringing new technology to the market. An illustration of your understanding of your target customers, addressable market, and commercialization of the reviewers makes you that much more competitive in your proposal and increases your chances of receiving funding.
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