Service Obtainable Market: What It Is and Why It Matters for Your Startup
Understanding your startup's potential for growth is crucial in determining how to allocate resources, set goals, and attract investors. One of the key metrics to evaluate is your Service Obtainable Market (SOM)—the portion of the market your company can realistically capture. In this article, we will break down what SOM is, how it differs from other market metrics like total addressable market (TAM) and Serviceable Available Market (SAM), and why it is essential for building a focused, sustainable strategy. You'll also learn how to calculate your SOM and how it helps refine your projections and increase investor confidence.
Related resource: How to Model Total Addressable Market (Template Included)
What is Service Obtainable Market (SOM)?
The Service Obtainable Market represents the portion of your total addressable market that your startup can realistically capture based on its current resources, capabilities, and competitive positioning. It is a refined market segment that takes into account the realities of your business—such as sales capacity, distribution channels, and brand recognition. While other metrics like TAM and SAM offer a broader view of market potential, SOM gives a grounded estimate of what’s achievable. For startups, this figure is crucial in shaping strategy, defining target customers, and setting realistic revenue expectations.
Factors of Service Obtainable Market
Several factors influence your Service Obtainable Market, helping you determine the most realistic portion of the market you can capture. These include:
Market Size and Reach
The size of the total addressable market (TAM) sets the foundation for calculating Service Obtainable Market. However, your actual reach depends on your geographic footprint, target demographics, and ability to effectively penetrate the market.
Related resource: Bottom-Up Market Sizing: What It Is and How to Do It
Product
The uniqueness and quality of your product will impact how much of the market you can capture. A product that meets specific needs or offers a strong value proposition can help you stand out and gain a larger share of the market.
Competition
The level of competition in your industry will directly affect your SOM. A highly competitive market may limit your share, while a niche market or one with fewer competitors can increase your potential capture.
Historical Performance and Research
Your past sales data and market research are valuable in estimating Service Obtainable Market. Trends in customer acquisition, product adoption, and overall performance provide a realistic basis for forecasting future growth within the obtainable market.
Understanding SOM, SAM, and TAM
To grasp the full scope of your startup’s market opportunity, it’s essential to understand three key metrics: TAM, SAM, and SOM. While TAM represents the total market demand for your product or service, SAM narrows it down to the portion you can serve based on your business model. SOM refines this even further, focusing on the market you can realistically capture given your resources and competitive positioning. Let’s explore these differences in more detail.
Related resource: Total Addressable Market: Lessons from Uber’s Initial Estimates
Service Available Market (SAM) vs. Service Obtainable Market (SOM)
Service Available Market (SAM) refers to the portion of the total market that your business can serve, based on factors such as your product offering, geographic reach, and target audience. It reflects the customers you could potentially access with your current business model.
On the other hand, Service Obtainable Market is a smaller, more realistic portion of SAM. It takes into account not only your ability to serve the market but also your competitive landscape, internal resources, and operational constraints. In essence, SOM is the market share you can realistically expect to capture in the short term.
Total Addressable Market (TAM)
Total Addressable Market (TAM) is the broadest metric of the three. It represents the total market demand for your product or service, assuming no competition or barriers to entry. TAM reflects the largest possible revenue opportunity available, but it often includes customers or segments beyond your reach or interest.
While TAM gives you a big-picture view of the entire market, SAM and SOM help you zoom in on the more actionable portions, with SOM being the most precise estimate of what your startup can capture in the near term.
Related resources:
- Total Addressable Market vs Serviceable Addressable Market
- What Is TAM and How Can You Expand It To Grow Your Business?
How to Calculate Your Service Obtainable Market
Calculating your Service Obtainable Market (SOM) is essential for setting realistic business goals and crafting an effective market strategy. While TAM and SAM provide a broader view of potential opportunities, SOM focuses on what your startup can actually capture in the market based on your resources and competitive strengths. To calculate Service Obtainable Market, you'll need to break down your market step by step, narrowing from the largest possible market to the portion you can truly serve. Let’s walk through the process of calculating SOM and how each step contributes to a precise understanding of your market opportunity.
Step 1: Define Your Total Addressable Market (TAM)
The first step in calculating your Service Obtainable Market is to define your Total Addressable Market the largest possible market for your product or service. To identify your TAM, you’ll need to evaluate the full demand for your offering across all potential customer segments, without considering competition or operational limitations.
Start by answering these key questions:
- Who are your potential customers? Identify all possible user groups or industries that would benefit from your product.
- What is the overall market size? Research the total number of customers or the revenue potential in your market globally or within your target regions.
- How big is the need or demand for your product? Assess the pain points your product addresses and the number of customers affected by these challenges.
By combining industry data, market reports, and demographic insights, you can estimate the maximum revenue potential of your product or service in its ideal conditions—this is your TAM.
Step 2: Narrow to Your Serviceable Available Market (SAM)
Once you’ve defined your Total Addressable Market (TAM), the next step is to narrow it down to your Serviceable Available Market (SAM)—the portion of the market that you can realistically serve, based on your business model, product offering, and geographic reach.
To assess your SAM, consider the following:
- Business Model: Which customers can you effectively serve with your current sales, distribution, and operational models? Some markets might be out of reach due to logistical or operational constraints.
- Product Fit: Focus on the customer segments where your product or service directly addresses specific needs or problems. Not every customer in the TAM will find your solution relevant.
- Geographic Limitations: Evaluate the regions where your business operates or where you plan to expand. Factors like local demand, regulations, and shipping constraints can limit which parts of the TAM are accessible to you.
By refining your TAM with these considerations, your SAM represents the subset of customers that you have the capability and infrastructure to reach and serve.
Step 3: Identify Your Competitive Edge
To determine your Service Obtainable Market (SOM), you need to identify your competitive edge—the unique advantages that set your startup apart from others in the market. This step involves analyzing your differentiators, understanding market barriers, and assessing your competition to pinpoint your realistic market share.
Consider the following:
- Differentiators: What makes your product or service stand out? This could be superior technology, pricing, customer experience, or unique features that competitors lack. Your ability to leverage these differentiators will help capture a larger portion of the market.
- Market Barriers: Identify any barriers to entry, such as high development costs, regulatory requirements, or brand loyalty to existing competitors. These barriers can limit your market access and must be factored into your SOM calculation.
- Competitors: Analyze your competitors' market share, customer loyalty, and positioning. Understanding their strengths and weaknesses will help you identify untapped opportunities where your startup can outperform or gain a foothold.
By combining these insights, you’ll be able to estimate the portion of the SAM that you can realistically capture, giving you a clear picture of your Service Obtainable Market.
Step 4: Calculate SOM
Now that you’ve identified your competitive edge and assessed the market, it’s time to calculate your Service Obtainable Market. To do this, you'll need to apply real-world factors such as sales capacity, market penetration, and your ability to reach customers within your Serviceable Available Market.
A simple formula to calculate Service Obtainable Market is:
SOM = SAM × Market Penetration Rate
For example, if your SAM is valued at $10 million and your startup's estimated market penetration rate is 10%, your SOM would be:
SOM = $10,000,000 × 0.10 = $1,000,000
This means that, based on your current resources and competitive position, you can realistically expect to capture $1 million of the $10 million available market. The market penetration rate can be influenced by factors like your sales team’s capacity, marketing effectiveness, and brand awareness.
By using this formula, you can calculate a more grounded estimate of your startup’s revenue potential within the Serviceable Available Market (SAM).
Why Service Obtainable Market Matters for Startups
Understanding your Service Obtainable Market is more than just a calculation—it’s a key element in shaping your startup’s strategy and ensuring sustainable growth. For startups, having a clear view of SOM allows for smarter decision-making, from resource allocation to revenue forecasting. By focusing on a realistic portion of the market, founders can set achievable goals, secure investor confidence, and avoid overextending their business too early. In the following sections, we’ll explore the specific ways SOM impacts your startup’s strategy, projections, and long-term success.
Focused Strategy
Knowing your Service Obtainable Market helps your startup stay focused by clearly defining the portion of the market you can realistically target. Instead of spreading your resources too thin trying to capture an overly broad audience, Service Obtainable Market allows you to concentrate on the most relevant customer segments. This focus ensures that your marketing, sales, and operational efforts are directed toward the right customer base—those who are most likely to convert. By avoiding the trap of overextending into markets where your resources, product fit, or brand presence are lacking, you can optimize your efforts and build sustainable growth more effectively.
Realistic Revenue Projections
Your Service Obtainable Market provides a solid foundation for creating accurate sales forecasts and revenue models. By focusing on the market you can realistically capture, SOM allows you to project revenues based on achievable goals rather than overly optimistic estimates. This level of precision is critical when presenting your business to potential investors, as they expect realistic financial models backed by data. Accurate revenue projections help ensure that your growth planning is sustainable and aligned with your current resources, making it easier to set clear milestones and secure the funding you need to scale.
Resource Allocation
Identifying your Service Obtainable Market enables your startup to allocate resources more efficiently across marketing, sales, and operations. By understanding exactly which portion of the market you can realistically capture, you can focus your efforts on the most promising opportunities. This targeted approach ensures that marketing budgets are spent on channels with the highest conversion potential, sales teams can prioritize leads most likely to close, and operational resources are scaled according to actual demand. Instead of spreading your team and resources too thin, SOM helps you streamline efforts to maximize impact and achieve better results with fewer resources.
Investor Confidence
Having a clear Service Obtainable Market (SOM) is a strong signal to investors that your startup has a realistic and achievable market strategy. Investors are looking for startups that understand their market deeply and have a plan that balances ambition with practicality. By demonstrating that you’ve calculated your SOM based on data-driven insights and realistic assumptions, you show investors that your growth projections are grounded in reality. This boosts their confidence in your ability to execute your business plan, allocate resources wisely, and achieve sustainable growth, making it easier to secure the funding needed to scale your operations.
Connect with Investors with Visible
Understanding your Service Obtainable Market is essential for shaping your startup’s strategy, creating realistic revenue projections, and efficiently allocating resources. By focusing on the market you can realistically capture, you position your business for sustainable growth and build investor confidence.
As you refine your market approach and seek funding, having the right tools to engage with investors is critical. Visible can help you manage your investor relationships and provide the insights you need to stay on top of your fundraising efforts.
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