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 truly seize.
It takes under consideration elements reminiscent of:
- Market Dynamics
- Buyer Retention
- Business Traits
Consider it as what you possibly can truly seize, given all of the dynamics in your favor and in opposition to you.
This may also help you higher align your technique and decide how a lot effort to place into advertising and marketing or product growth.
The massive distinction between SAM and SOM is that SAM assumes you’ve the assets to seize your goal market, whereas SOM takes under consideration the precise dynamics out there.
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 seek out final yr’s market share, it is advisable divide final yr’s income by final yr’s SAM.
Utilizing the $100,000 SAM from above, let’s faux 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 can be $60,000. Given all of the dynamics out there, that is the estimated market measurement you possibly can seize.
Utilizing the earlier pet food enterprise, let’s faux 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 can 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.