By Fernando Berrocal

The Serviceable Obtainable Market (SOM) is an estimate of how much revenue a startup may acquire within a given product category. Another way to look at it is as an estimate of a startup's potential market share for a certain product. It is a component of market segmentation analysis, which is widely utilized in a startup's marketing and operational decisions.

The total attainable market, which is the overall market demand for a given product or service, may be contrasted to SOM. It can also be contrasted to the Serviceable Available Market (SAM), which is the fraction of the market that is physically accessible.

Looking at SOM as a percentage of the serviceable obtainable market and the total available market is the best approach to comprehend it. It's the portion of the market that a business believes it can realistically capture.

Summary:

• The serviceable obtainable market (SOM) is an estimate of how much income a business can acquire within a given product category.
• Market size/reach, product, and competition are all factors that influence SOM.
• It's helpful to think about previous performance, competition, and external research while calculating SOM.

Serviceable Obtainable Market – Factors:

1. The size and reach of the market: The first element to consider while calculating SOM is the product's market size. The geographical region in which a product is provided must be used to estimate the market size for that product. The company's capabilities should be considered when calculating the projected reach. For example, while a startup selling online may theoretically sell to anybody with access to the internet anywhere in the world, its reach would be significantly limited due to limitations such as target market and budget.

2. Product: To make an accurate SOM prediction, it's also necessary to consider the product's location in the market. The product should be evaluated concerning the demand for it in the geographic market in which the startup operates. Growth and consumer mood should also be taken into account.

3. Competition: You must be able to properly analyze both direct and indirect rivals, as well as their strength and presence in the market. A startup's ability to predict how much of the market they can acquire is assisted by knowing how much market share competitors have.

4. External research and historical performance: This includes searching into the startup's previous performance as well as revenue predictions for the next several years. Historical data can help to determine realistic market size and share estimates. Collecting research regarding their industry and geographic location is critical for start-ups and small businesses.

When calculating SOM, all of these factors should be evaluated together. In certain cases, though, it may be more appropriate to focus on one or two. A startup that is just entering a market, for example, will have little or no historical data.

Serviceable Obtainable Market – Importance:

For businesses to make financial predictions and operational choices, the concept of SOM is critical. Using this concept, startups may estimate revenues based on a percentage of market share using the criteria listed above. It may also help organizations in evaluating various market opportunities or gaps.

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SOM analyzes a business's competitive situation and supports management in developing a strategy that better positions the startup in the market. Investors can more properly determine the potential upside and risk associated with an opportunity by evaluating the SOM. When it comes to making investment decisions, it's critical to understand how a startup's strategy fits into the market.

Serviceable Obtainable Market – Example:

A soccer ball shop in Vancouver, Canada wishes to calculate their SOM to project their revenues. They are aware that the global market for soccer balls is $1 billion per year, with a local market of $500,000.

They believe they can get 50% of the market share based on previous performance and competitor information. As a result, their SOM will be $250,000 ($500,0000 * 50% market share).

Serviceable Obtainable Market – Limitations of Use:

When looking at metrics like SOM, many startups overestimate their prospective earnings. A new video game company, for example, may project conquering 0.1% of the global video game industry. While this appears to be a realistic number, it still corresponds to $160 million in sales. 

The use of a calculation based on a segmented and complex industry is the first flaw in this forecast. The video game industry employs a lot of people who create anything from smartphone apps to console games.

When making projections based on SOM, it's important to do so as gradually as possible. Because the SOM calculation is based on numerous assumptions, it must be paired with other metrics when making a choice.

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