Total addressable market (TAM) is the total annual revenue opportunity available for a product or service, assuming 100% market penetration with no limitations from geography, competition, pricing, or capacity. It represents the broadest possible market demand, either globally or within a defined sub-market relevant to your offering.

While TAM includes all potential customers, it doesn't account for real-world constraints like distribution, regulation, or competitor presence. These limitations are factored into narrower market sizing models, such as serviceable available market (SAM) and serviceable obtainable market (SOM). 

Formula:

TAM = Number of potential customers × Average annual revenue per customer

Example:

If you sell a CRM tool for small businesses and there are 10 million small businesses globally that could use such a tool, and the average spend per year on CRM is $500, your TAM would be:

TAM = 10,000,000 × $500 = $5B