SOM stands for “Serviceable Obtainable Market,” which is the estimated market measurement you could seize.
What’s SOM (Serviceable Obtainable Market)?
SOM is an estimate of the portion of your serviceable addressable market you could really seize.
It takes under consideration elements reminiscent of:
- Market Dynamics
- Competitors
- Buyer Retention
- Business Developments
Consider it as what you may really seize, given all of the dynamics in your favor and in opposition to you.
This may help you higher align your technique and decide how a lot effort to place into advertising or product improvement.
The large distinction between SAM and SOM is that SAM assumes you’ve gotten the sources to seize your goal market, whereas SOM takes under consideration the precise dynamics available in the market.
How Do You Calculate SOM
SOM is calculated by taking final 12 months’s market share and multiplying it by this 12 months’s SAM.
Step 1: Discover final 12 months’s market share.
To seek out final 12 months’s market share, it is advisable to divide final 12 months’s income by final 12 months’s SAM.
Utilizing the $100,000 SAM from above, let’s fake your income final 12 months was $40,000.
Final Yr’s Income/Final Yr’s SAM = Final Yr’s Market Share
40,000/100,000 = 0.4 or 40% = Final Yr’s Market Share
Step 2: Discover Your SOM
Let’s say your SAM this 12 months is $150,000.
Final Yr’s Market Share x This Yr’s SAM = SOM
0.4 x $150,000 = $60,000 = SOM.
On this instance, your SOM can be $60,000. Given all of the dynamics available in the market, that is the estimated market measurement you may seize.
SOM Examples
Utilizing the earlier pet food enterprise, let’s fake your SAM this 12 months was $50,000,000, and you determine that your final 12 months’s market share was 0.35 or 35%.
So your SOM this 12 months can be 0.35 x $50,000,000 = $17,500,000.
Bear in mind, this determine is simply an estimate and might change relying on business traits and different elements.
