SOM stands for Serviceable, Obtainable Market and refers to the portion of the addressable market that a start-up can realistically reach within a specified period.
This takes into account not only market size and the target audience, but also the company’s actual capabilities. These include, amongst other things, budget, team size, sales capacity, competition and regional reach.
SOM forms part of the market size analysis using TAM and SAM:
| Key figure | Meaning |
| TAM | Total Addressable Market: the entire theoretically possible market |
| SAM | Serviceable Available Market: the part of the market that the company can, in principle, serve with its offering |
| SOM | Serviceable Obtainable Market: the share of the market that the company can realistically capture |
One example:
A start-up offers software for medium-sized manufacturing companies in Germany.
| Market tier | Example |
| TAM | global market for business software |
| SAM | German medium-sized manufacturing companies for which the software is suitable |
| SOM | Companies that can realistically be secured over the next three years using current sales resources |
When determining the SOM, start-ups should, for example, take the following factors into account:
- Number of potential customers who can be reached
- existing sales and marketing capabilities
- average turnover per customer
- Strength and number of competitors
- expected conversion rate
- Duration of the sales process
- available financial resources
- geographical and regulatory restrictions
- planned market entry strategy
A simplified calculation might look like this:
Potential customers × expected annual turnover per customer = SOM
Let’s assume that a start-up can realistically acquire 500 customers within three years. The average annual turnover is 4,000 euros per customer.
500 customers × 4,000 euros = 2 million euros SOM
The SOM helps entrepreneurs to:
- to set realistic turnover and growth targets
- Planning sales resources effectively
- to prioritise particularly attractive customer segments
- to better assess capital requirements
- to flesh out the go-to-market strategy
- To present investors with a clear market entry plan
A common mistake is to state the SOM as a blanket percentage of the total market. Statements such as „We reach one per cent of the market“ are not very meaningful unless it is explained how these customers are to be acquired.
A convincing SOM is therefore based on reasonable assumptions, market data and the start-up’s actual capabilities. It should also cover a clearly defined timeframe and be regularly updated in line with new insights.
innoWerft helps founders to realistically narrow down their target markets and customer segments, calculate market potential based on robust assumptions, and present TAM, SAM and SOM in a clear and understandable way for business planning, market entry and discussions with investors.