SOM stands for “Serviceable Obtainable Market,” which is the estimated market measurement that you would be able to seize.
What’s SOM (Serviceable Obtainable Market)?
SOM is an estimate of the portion of your serviceable addressable market that you would be able to really seize.
It takes under consideration elements corresponding to:
- Market Dynamics
- Competitors
- Buyer Retention
- Business Developments
Consider it as what you may really seize, given all of the dynamics in your favor and towards you.
This may also 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 will have the assets 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 yr’s market share and multiplying it by this yr’s SAM.
Step 1: Discover final yr’s market share.
To search out final yr’s market share, you have to divide final yr’s income by final yr’s SAM.
Utilizing the $100,000 SAM from above, let’s fake your income final yr 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 yr 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 could 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 yr was $50,000,000, and you determine that your final yr’s market share was 0.35 or 35%.
So your SOM this yr could be 0.35 x $50,000,000 = $17,500,000.
Bear in mind, this determine is simply an estimate and may change relying on trade developments and different elements.
