What is Serviceable Obtainable Market (SOM)?
Serviceable Obtainable Market, or SOM, is the portion of the Serviceable Available Market (SAM) that a company can realistically capture in the short to medium term.
Detailed Explanation
SOM is the segment of SAM that a company can reach and obtain within its operating constraints, which may include factors like resource limitations, competitive landscape, and market conditions. For SaaS businesses, SOM would be the subset of SAM that they can acquire based on their competitive strengths, unique value propositions, marketing efforts, and other operational factors.
Why It Matters
Understanding SOM is crucial for SaaS CEOs and CMOs for making strategic decisions. It provides a realistic estimate of the market share that can be captured in the near future, serving as a basis for revenue forecasts, resource allocation, and strategic planning. This is particularly important when considering the broader context of the Total Available Market (TAM), as it helps businesses identify their potential growth within the larger market.
Potential Misunderstandings
A common misunderstanding is equating SOM with the total potential of a business. SOM only represents the achievable market in the short to medium term, not the total potential market or revenue a company can reach in the long term.
Frequently Asked Questions
- What’s the difference between SAM and SOM?
While SAM is the market that a company can serve considering its product and geographical constraints, SOM is the realistically obtainable market share within the SAM considering the company’s operational constraints and competitive landscape. - How is SOM calculated in a SaaS context?
SOM in a SaaS company is calculated by considering the total SAM and then refining it based on factors like company’s competitive position, marketing effectiveness, and sales capacity.