SOM stands for “Serviceable Obtainable Market,” which is the estimated market dimension which you can seize.
What's SOM (Serviceable Obtainable Market)?
SOM is an estimate of the portion of your serviceable addressable market which you can really seize.
It takes under consideration components corresponding to:
- Market Dynamics
- Competitors
- Buyer Retention
- Trade Developments
Consider it as what you'll be able to really seize, given all of the dynamics in your favor and in opposition to you.
This might help you higher align your technique and decide how a lot effort to place into advertising and marketing or product growth.
The large distinction between SAM and SOM is that SAM assumes you've 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 search out final 12 months’s market share, it is advisable divide final 12 months’s income by final 12 months’s SAM.
Utilizing the $100,000 SAM from above, let’s faux your income final 12 months was $40,000.
Final 12 months’s Income/Final 12 months’s SAM = Final 12 months’s Market Share
40,000/100,000 = 0.4 or 40% = Final 12 months’s Market Share
Step 2: Discover Your SOM
Let’s say your SAM this 12 months is $150,000.
Final 12 months’s Market Share x This 12 months’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 dimension you'll be able to seize.
SOM Examples
Utilizing the earlier pet food enterprise, let’s faux 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.
Keep in mind, this determine is simply an estimate and might change relying on trade traits and different components.
