How to identify your Total Addressable Market (TAM) in Talent Acquisition

Understanding your Total Addressable Market (TAM) is crucial for effective talent acquisition. It enables you to set clear outreach goals, measure market coverage, and gain insights for future hiring. However, simply identifying your TAM isn’t enough—you also need to refine it into a Total Obtainable Market (TOM) that represents the candidates you can realistically hire. Learn more about talent acquisition strategies at Move.

1. Market size: understanding TAM and TOM

Total Addressable Market (TAM):This represents the full pool of candidates who possess the necessary qualifications for your roles. It includes all potential candidates within the industry, regardless of their likelihood to join your company.

Total Obtainable Market (TOM):A subset of the TAM, TOM consists of candidates who are realistically attainable. Factors such as your company's reputation, domain, employer value proposition (EVP), and salary range influence this pool.

By defining both TAM and TOM, you gain a clearer picture of the market’s potential and your actual hiring capabilities.

2. Steps to define your TAM and TOM

1. Start broad

Begin by identifying the fundamental skills and job titles required for your roles. Consider industry-wide standards and qualifications, ensuring you start with a comprehensive view of the talent pool.

2. Refine

Narrow your focus to specific industries, domains, or geographic locations that align with your hiring needs. Look at industry trends, hiring competition, and candidate availability to refine your list of potential candidates.

3. Level the offering

Assess how your company’s salary, benefits, and other perks compare to competitors. Understanding how your offerings stack up helps you realistically estimate your TOM.

3. Key metrics to track

To measure your effectiveness in engaging with the talent market, track the following key metrics:

• Competitive Index: The percentage of salaries below your offering. Formula:
• Competitive Index = (# of salaries below your offering / total # of salaries) × 100
• Engagement Rate: The percentage of candidates who respond to outreach. Formula:
• Engagement Rate = (# of candidates who responded / # of TAM) × 100
• TAM/TOM Coverage: The percentage of the total market worked (e.g., candidates messaged at least once). This provides insight into how much of the market you have actively engaged with. Read more about essential recruitment metrics in this blog post.

4. Best sources for Market Research

To gather data on your TAM and TOM, leverage reliable sources, including:

• Crunchbase – For company and industry insights.
• LinkedIn Recruiter – To analyze talent pools and engagement rates.
• LTI (Labor Market Intelligence tools) – For industry hiring trends.
• Beauhurst – For startup and scale-up hiring trends.
• Candidates themselves – For direct feedback on job expectations.
• Glassdoor – For salary and employer branding insights.

5. Common mistakes to avoid

When defining your TAM and TOM, be mindful of the following pitfalls:

• Overestimating TOM – Not all qualified candidates are realistically obtainable.
• Ignoring the Competitive Index – Failing to benchmark salaries and benefits against competitors can lead to misjudgments.
• Lack of Expertise in Calculation – Misinterpreting data can skew market estimates.
• Ignoring Talent Flows – Overlooking industry migration trends can affect hiring success.
• Failing to Track Skills Trends – Certain skills may be in ascendency or decline, impacting hiring potential.

6. Why this matters

Investing time in defining your TAM and TOM offers significant benefits, such as:

• Setting Clear Goals for Outreach – Define realistic hiring expectations.
• Improving Capacity Planning – Estimate hiring timelines more effectively.
• Enhancing Offerings – Adjust compensation and perks to attract top talent.
• Ensuring an Empirical Sourcing Approach – Use data-driven hiring strategies.
• Gathering Market Intelligence – Stay informed on industry talent trends.

By following these steps, you can build a more structured and strategic approach to talent acquisition, ensuring your hiring efforts are efficient and data-backed.