SOM stands for “Serviceable Obtainable Market,” which is the estimated market size that you can capture.
What is SOM (Serviceable Obtainable Market)?
SOM is an estimate of the portion of your serviceable addressable market that you can actually capture.
It takes into account factors such as:
- Market Dynamics
- Competition
- Customer Retention
- Industry Trends
Think of it as what you can actually capture, given all the dynamics in your favor and against you.
This can help you better align your strategy and determine how much effort to put into marketing or product development.
The big difference between SAM and SOM is that SAM assumes you have the resources to capture your target market, while SOM takes into account the actual dynamics in the market.
How Do You Calculate SOM
SOM is calculated by taking last year’s market share and multiplying it by this year’s SAM.
Step 1: Find last year’s market share.
To find last year’s market share, you need to divide last year’s revenue by last year’s SAM.
Using the $100,000 SAM from above, let’s pretend your revenue last year was $40,000.
Last Year’s Revenue/Last Year’s SAM = Last Year’s Market Share
40,000/100,000 = 0.4 or 40% = Last Year’s Market Share
Step 2: Find Your SOM
Let’s say your SAM this year is $150,000.
Last Year’s Market Share x This Year’s SAM = SOM
0.4 x $150,000 = $60,000 = SOM.
In this example, your SOM would be $60,000. Given all the dynamics in the market, this is the estimated market size you can capture.
SOM Examples
Using the previous dog food business, let’s pretend your SAM this year was $50,000,000, and you figure out that your last year’s market share was 0.35 or 35%.
So your SOM this year would be 0.35 x $50,000,000 = $17,500,000.
Remember, this figure is just an estimate and can change depending on industry trends and other factors.
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