Understanding the Concept of Serviceable Obtainable Market (SOM)
The business world is filled with acronyms and terminologies, essential building blocks for professionals to communicate effectively. One such vital term is the Serviceable Obtainable Market (SOM). A robust grasp of this concept can play an integral role in the successful launch and scaling of a product or service.
A Close Look at SOM
To understand the term Serviceable Obtainable Market, we first need to decode the words ‘serviceable’ and ‘obtainable.’ The term ‘serviceable’ refers to the section of the market that a company can serve, given its product features, competition, and distribution limitations. The word ‘obtainable,’ meanwhile, denotes the portion of the market that the company can realistically acquire, given its unique business capabilities, such as its sales force, promotional activities, price points, among others.
Put together, Serviceable Obtainable Market (SOM) is a measure of the portion of the market that can be realistically served by a company. SOM is a subset of two broader market measurements – Total Addressable Market (TAM) and Serviceable Available Market (SAM).
The Total Addressable Market (TAM) refers to the entire revenue opportunity for a particular product or service. Serviceable Available Market (SAM), on the other hand, is the segment of TAM targeted by a company within its business model and capabilities reach.
While TAM gives the broader picture, SOM hones in on what is immediately achievable. In practical terms, SOM refers to the short-to-medium term sales opportunities in a specific market sector.
It is a useful metric for potential investors to evaluate a company’s revenue potential and growth rate. A practical and realistic SOM can provide investors with a clear vision of a company’s potential profitability and growth, contributing to their decision-making process.
The Importance of SOM for Businesses
Identifying your SOM is a crucial part of business strategy, particularly for startups and businesses aiming to launch new products or services. It provides a realistic market size that the company can aim for in the early stages, allowing the company to formulate effective go-to-market strategies and prioritize resources.
Determining the SOM involves a keen understanding of the product or service offering, in-depth awareness of the competition, and close attention to the company’s unique capabilities. By narrowing down and focusing on this achievable market, businesses can tailor their marketing strategies more effectively.
The SOM also helps set sensible and achievable business goals. It enables business leaders to align their teams around realistic targets. With clearly defined goals, the team can design strategies and tactics to achieve them.
Lastly, a thoughtful SOM reflects positively on the company, signaling the management’s understand of the market, competition, and the company’s unique capabilities. This insight can be a point of attraction for potential investors, who are looking for realistic business plans and practical financial projections.
Calculating SOM
You can calculate Serviceable Obtainable Market by identifying a percentage of the SAM that your company can capture effectively. You can base this percentage on factors like your company’s unique capabilities, competitive analysis, pricing strategies, and distribution channels.
Here’s a simple formula – SOM = SAM x (% of SAM the company can reach with its distribution network) x (% of SAM reachable given the budget, workforce, and business model).
The percentage of SAM that a company can realistically capture is often a best-guess estimation, coming from an understanding of the market, the competition, and the company’s services and products. Validating this estimation with market research and careful competitor analysis is crucial for a realistic SOM calculation.
In conclusion, the Serviceable Obtainable Market is a valuable business concept. A realistic SOM projection can provide guidance on strategic, operational, and financial decisions, contributing to a successful product or service launch and sustainab