In the world of entrepreneurship and investing, understanding the size of your market is one of the most important steps toward building a sustainable business. While many founders start with the broad Total Addressable Market (TAM) and then narrow it to the Serviceable Available Market (SAM), the most practical and realistic measure is the Serviceable Obtainable Market (SOM).
SOM represents the portion of the market that you can actually capture, given your resources, competition, and distribution capacity. For startups, entrepreneurs, and investors, it provides a realistic view of revenue potential and helps guide decisions around product launches, funding, and strategic growth. To fully understand SOM, it’s important to see how it fits within the bigger framework of Total Addressable Market and Serviceable Available Market.
What is Serviceable Obtainable Market (SOM)?
The Serviceable Obtainable Market (SOM) is the realistic share of the market that a business can capture within a specific timeframe. Unlike TAM, which covers the global or universal opportunity, and SAM, which narrows the scope to the markets a business can service, SOM zooms in further. It answers the crucial question: What percentage of the market can we realistically win, considering competition, resources, and time?
SOM is critical because it bridges ambition with practicality. For example, while a new software company may see a SAM worth $500 million, it might realistically only target 5% of that market in the first three years. That 5% becomes its SOM, offering a practical revenue forecast and a foundation for business planning.
The Difference Between TAM, SAM, and SOM
To avoid confusion, it’s essential to clarify the differences between these three core market-sizing concepts.
| Market Concept | Definition | Example |
|---|---|---|
| TAM (Total Addressable Market) | The overall revenue opportunity if you captured 100% of the market. | Global demand for fitness apps worth $50B. |
| SAM (Serviceable Available Market) | The portion of TAM your product or service can realistically serve based on geography, customer type, or product scope. | U.S. fitness app users, worth $5B. |
| SOM (Serviceable Obtainable Market) | The slice of SAM you can realistically capture given competition, resources, and time. | Capturing 10% of U.S. market = $500M. |
This layered approach—TAM, SAM, and SOM—ensures businesses don’t overestimate potential and instead align goals with achievable market share.
Why SOM is Critical for Startups, Investors, and Strategic Planning
For startups and investors, SOM is more than just a number—it’s a measure of feasibility and risk. While TAM and SAM are helpful for showing the big picture, investors know that not every business can immediately dominate a market. SOM demonstrates realism by setting expectations around growth pace and achievable revenue.
When building a Business Plan, SOM provides the credibility needed to convince investors that projections are grounded in evidence, not wishful thinking. For strategic planning, it helps entrepreneurs allocate resources efficiently—whether it’s deciding which customer segment to target first, or which geographic region has the highest probability of success.
Ultimately, SOM reflects a company’s market reality—a critical factor in securing funding and guiding smart decisions.
Methods to Calculate SOM
Estimating SOM requires careful research and realistic assumptions. Entrepreneurs often use one of three primary methods:
Top-Down Approach
This method starts with TAM and SAM, then narrows down based on estimated market share. For instance, if SAM is $200 million and you expect to capture 2% of it, your SOM is $4 million.
Bottom-Up Approach
Bottom-up calculations rely on actual sales data, pricing, and distribution capacity. For example, if your company can sell 50,000 units annually at $50 each, your SOM is $2.5 million. This method is often considered more reliable because it builds from measurable data.
Competitor Analysis
By studying competitors’ performance and market penetration, you can estimate your likely share. If competitors collectively serve 30% of the market, your SOM might reflect what portion you can realistically capture against them.
The most accurate SOM often combines elements of all three methods, supported by detailed Market Research.
Real-World Examples of SOM Calculations Across Industries
Example 1: E-commerce Startup
An online clothing retailer identifies a TAM of $100 billion for global fashion. Narrowing to SAM, they target a $5 billion niche in urban online shopping. With current resources, marketing spend, and delivery capabilities, they estimate capturing 1% in the first five years—giving them a SOM of $50 million.
Example 2: SaaS Company
A software company develops a project management tool. TAM is $10 billion globally. The SAM focuses on small businesses in North America worth $1 billion. With an aggressive strategy and competitive pricing, the startup forecasts capturing 2% of SAM within three years, giving a SOM of $20 million.
These examples highlight how SOM transforms large, abstract numbers into realistic goals.
How SOM Influences Business Plans, Product Launches, and Fundraising
SOM plays a direct role in shaping how businesses plan, launch, and raise money. Investors often ask entrepreneurs to provide SOM estimates as part of fundraising pitches, because it demonstrates that the founder understands not just the opportunity but also the competition and operational limits.
In product launches, SOM helps companies determine which features or markets to prioritize first. A startup launching a mobile app, for instance, might target a smaller SOM in one city before expanding nationally. This ensures efficient resource allocation and minimizes risks.
In a Start a New Business guide, SOM is especially valuable for early founders who may otherwise overestimate their potential. By presenting realistic market capture, businesses establish credibility with stakeholders and avoid costly mistakes.
Mistakes to Avoid When Estimating SOM
Many entrepreneurs fall into traps when calculating SOM. Common mistakes include:
- Overestimating growth potential without factoring in competition.
- Ignoring operational limitations, such as staffing, logistics, or distribution.
- Failing to validate assumptions with proper market data.
- Using only a top-down approach without bottom-up validation.
Avoiding these errors is crucial. An inflated SOM not only misguides strategy but also undermines trust with investors who expect grounded numbers.
How to Integrate SOM Insights into Growth Strategies
SOM should not be seen as a static figure but as a dynamic part of business strategy. As a company scales, its obtainable market share may expand due to improved distribution, brand awareness, or new product offerings.
Integrating SOM into strategic decisions helps in:
- Prioritizing marketing spend where it yields the highest return.
- Identifying untapped niches within the SAM.
- Creating staged growth strategies—capturing a small SOM initially, then expanding further.
- Building more persuasive financial models and investor decks.
By embedding SOM insights into decision-making, entrepreneurs ensure their growth path is realistic and sustainable.
Conclusion
The Serviceable Obtainable Market (SOM) is one of the most important tools for entrepreneurs and investors who want a clear picture of achievable success. While TAM and SAM highlight the broader opportunity, SOM provides the practical lens for what can be realistically captured given competition, resources, and market entry strategy.
For startups preparing a Business Plan or entrepreneurs looking to attract investment, SOM delivers the credibility needed to stand out. It not only demonstrates realism but also guides smarter decisions about product launches, market entry, and long-term scaling. By combining detailed Market Research with practical assumptions, businesses can use SOM as a compass for both short-term execution and long-term growth.
In short, SOM ensures that bold visions are grounded in reality—making it a cornerstone of sustainable business success.
