Serviceable Obtainable Market

Definition

Serviceable Obtainable Market (SOM) refers to the portion of the target market that a business can realistically capture, considering its resources and competition. It represents a more focused subset of the overall addressable market, taking into account the company’s capabilities, distribution channels, and market penetration strategies. Understanding SOM is essential for evaluating the potential revenue and growth opportunities for a business during operational assessments and commercial evaluations.

5 Must Know Facts For Your Next Test

1. SOM helps businesses prioritize their sales efforts by identifying realistic targets within their total addressable market.
2. Accurately defining SOM requires an understanding of both internal capabilities and external market conditions.
3. SOM can change over time as businesses evolve, competitive landscapes shift, and new opportunities emerge.
4. In operational due diligence, evaluating SOM can provide insights into potential revenue streams and financial sustainability.
5. Investors often assess a company’s SOM to gauge its growth potential and overall market strategy.

Review Questions

• How does understanding the Serviceable Obtainable Market contribute to effective operational strategies for a business?
  • Understanding the Serviceable Obtainable Market (SOM) allows a business to focus its operational strategies on achievable segments of the market. By identifying which parts of the target audience they can realistically capture, companies can allocate resources effectively, optimize marketing efforts, and tailor product offerings. This targeted approach helps maximize potential revenue while minimizing wasteful spending in areas that are unlikely to yield returns.
• Discuss how changes in competition can impact a company's Serviceable Obtainable Market.
  • Changes in competition can significantly affect a company's Serviceable Obtainable Market by altering the landscape of who is vying for consumer attention. If new competitors enter the market with superior products or aggressive pricing strategies, they may reduce the SOM available to established players. This shift necessitates that companies reassess their market positioning, adapt their offerings, and potentially redefine their SOM based on updated competitive dynamics to maintain relevance and profitability.
• Evaluate the importance of Serviceable Obtainable Market in investment decisions made by venture capitalists.
  • Serviceable Obtainable Market is critical in investment decisions made by venture capitalists because it serves as a key indicator of a startup's growth potential. By analyzing a company's SOM, investors can determine whether there is a realistic path for capturing market share and generating revenue. A well-defined SOM signals to investors that the company understands its place in the market and has a viable strategy to scale. Furthermore, knowing the SOM helps investors assess risk levels, as a larger attainable market may indicate better chances for returns on investment.

Related terms

Total Addressable Market: The total revenue opportunity available if a product or service achieved 100% market share across the entire market.

Market Segmentation: The process of dividing a broad consumer or business market into sub-groups based on shared characteristics.

Competitive Analysis: An assessment of the strengths and weaknesses of current and potential competitors within a market.