Service Obtainable Market (SOM) for Startups: Why It Matters and How to Leverage It

Imagine you’re pitching to investors, confident about the vast potential of your startup’s product, yet unsure of the market you can realistically capture. Many startups initially fixate on big numbers like Total Addressable Market (TAM) to illustrate the scale of opportunity, but this approach often falls short when crafting actionable growth strategies. Knowing what portion of that market you can genuinely seize—your Service Obtainable Market (SOM)—is what drives effective decision-making, resource allocation, and long-term growth.

In this guide, we’ll unpack the concept of Service Obtainable Market (SOM) for startups, explore its relationship with TAM and SAM, and demonstrate why understanding SOM is essential for startups seeking sustainable success. We'll also provide practical steps for calculating your SOM and actionable tips for expanding it over time.

Understanding TAM, SAM, and SOM for Startups: A Practical Framework

The TAM-SAM-SOM framework allows startups to break down their total market potential into realistic, actionable segments:

1. TAM (Total Addressable Market): The theoretical maximum revenue opportunity if your product captured 100% of its market. To understand the full scope of your market, refer to our guide on Total Addressable Market (TAM) and How to Expand It to Grow Your Business, which highlights strategies to grow and leverage TAM effectively.

2. SAM (Serviceable Available Market): A refined segment of TAM that your business could realistically serve based on your current operational capabilities, target demographics, and geographic scope. SAM accounts for your practical limitations and represents the audience you could reach given the infrastructure and distribution channels available to you.

3. SOM (Service Obtainable Market): SOM is the most specific and actionable part of this framework. For startups, Service Obtainable Market (SOM) is the portion of the SAM you can realistically capture, considering competition, market saturation, and internal resources. In essence, SOM is the part of the market you can feasibly “own” in the near term given your current go-to-market strategies and operational capabilities.

   
   

The TAM-SAM-SOM framework provides a funnel that narrows down from broad market potential to a focused, achievable target. TAM offers a vision of market scale, SAM highlights a feasible scope, and SOM pinpoints the share your startup can realistically aim to capture within a defined timeframe. Together, these metrics give a holistic view of both ambition and reality, essential for strategic planning and communication with stakeholders.

Why Service Obtainable Market (SOM) for Startups Is Crucial

While TAM and SAM offer valuable high-level views, SOM is the metric that grounds your growth potential in reality. For startups, understanding Service Obtainable Market (SOM) helps guide a range of strategic initiatives:

1. Securing Investor Confidence: Investors are drawn to data-driven, realistic projections that balance ambition with practicality. Demonstrating SOM for startups—based on real-world factors such as competition and available resources—shows investors that your growth plans are achievable, increasing their trust and confidence in your startup.

2. Focusing Resource Allocation: Knowing your Service Obtainable Market (SOM) allows for more efficient allocation of resources across marketing, sales, and operations. Rather than stretching resources thin over a broad audience, focusing on SOM enables you to target customer segments with the highest return potential.

3. Setting Realistic Revenue Forecasts: By anchoring projections in SOM for startups, startups can avoid inflated revenue targets and unrealistic growth expectations. SOM enables startups to project sales more accurately, align budgets, and set achievable financial goals, which are essential for internal planning and investor communications.

4. Achieving Strategic Market Positioning: Understanding Service Obtainable Market (SOM) for startups enables startups to identify and focus on customer segments where they have the greatest competitive advantage. This focus not only improves initial market entry but also establishes a stronger, more defensible market position that supports growth. For more on entering and defending your position in the market, our guide on Sales-Led Go-to-Market Strategies for Tech Startups offers strategic insights.

5. Guiding Incremental Market Expansion: For many startups, SOM is a starting point. With time, product improvement, and expanded capabilities, SOM can evolve to capture a larger portion of SAM, creating a sustainable path to growth. Learn how to perform bottom-up market sizing to accurately determine your Service Obtainable Market (SOM).

   
   

In short, SOM enables startups to balance aspirational goals with pragmatic realities, helping them scale within their means while planning for sustainable expansion.

Key Factors Influencing Service Obtainable Market (SOM) for Startups

Several critical factors shape your Service Obtainable Market (SOM) and determine the portion of the serviceable market you can capture:

1. Competitive Landscape: The intensity and nature of competition affect your SOM. A saturated market with well-established players can limit your initial capture rate, while niche or emerging markets may offer greater potential for startups with differentiated offerings.

2. Product Differentiation and Market Fit: Startups with a unique value proposition, distinct features, or innovative solutions often have an advantage in capturing a larger share of their SAM. The better your product fits the market need, the higher your potential SOM as customers are drawn to unique benefits. Achieving this fit is essential—refer to our blog on How to Achieve Product-Market Fit: A Guide for Tech Startups for insights on aligning your offering with market needs.

3. Sales and Distribution Capacity: SOM depends significantly on how effectively you can reach and serve customers. The scale, reach, and efficiency of your sales and distribution channels will determine how much of the SAM you can realistically capture.

4. Brand Positioning and Awareness: Effective brand positioning and awareness can enhance SOM. A strong brand helps build trust and credibility, increasing the likelihood that customers will choose your product over competitors.

5. Market Accessibility and Geographic Reach: Some portions of SAM may be geographically or logistically inaccessible due to regulatory barriers, lack of infrastructure, or limited brand presence. Startups can focus on regions where their product-market fit is strongest, allowing for a realistic approach to market penetration.

6. Customer Support and Retention: A positive customer experience can enhance SOM by promoting customer loyalty and generating word-of-mouth referrals. Startups that prioritize customer satisfaction and build relationships with early adopters often see a stronger market presence.

   
   

By evaluating and addressing these factors, startups can shape a realistic SOM and build a growth strategy that capitalizes on their strengths while minimizing potential barriers.

How to Calculate SOM for Startups: A Step-by-Step Guide

Calculating Service Obtainable Market (SOM) for startups requires a systematic, data-driven approach that begins with TAM and SAM and narrows down to SOM:

Step 1: Define Your Total Addressable Market (TAM)

Your TAM represents the maximum revenue opportunity if your product captured 100% of its market. To define TAM accurately:

• Identify All Potential Customers: Include every user group that could benefit from your product. For example, if you offer a project management tool, your TAM could include all businesses with project management needs.

• Estimate Market Size: Use industry research reports, market data, and demographics to estimate the size of the TAM. This research provides a foundation for determining SAM and SOM.

  
  

Step 2: Narrow Down to Your Serviceable Available Market (SAM)

From TAM, identify the subset of customers you can realistically reach based on your current operations, capabilities, and geographical reach.

• Assess Operational Scope: Consider where you have the infrastructure to support and serve customers effectively. For instance, if you have distribution limited to North America, your SAM would focus on customers within this region.

• Focus on Relevant Customer Segments: Not all customers in TAM will find your product relevant. Focus on segments within TAM where your product directly addresses their needs.

  
  

Step 3: Analyze Competitive Position and Market Barriers

Now that you have your SAM, refine it to determine SOM by assessing competition and other barriers:

• Evaluate Differentiators: Identify unique features, pricing, customer support, or other aspects that differentiate you from competitors. Highlighting these factors strengthens your SOM by enhancing your market appeal.

• Assess Market Entry Barriers: Identify barriers to market entry, such as regulatory constraints, brand loyalty to competitors, or cost barriers. These barriers must be factored into your SOM estimate.

  
  

Step 4: Apply a Realistic Market Penetration Rate

A commonly used formula for SOM is:

SOM = SAM × Market Penetration Rate

Estimate a realistic penetration rate based on factors such as sales capacity, competitive positioning, and market conditions. For example:

If your SAM is $20 million and your estimated penetration rate is 10%, then: SOM = $20,000,000 × 0.10 = $2,000,000

This calculation gives you a clear revenue target based on your capabilities and market conditions.

Strategic Benefits of a Well-Defined SOM for Startups

1. Precision in Revenue Forecasts: SOM anchors revenue projections in achievable goals, avoiding inflated forecasts and enabling startups to set realistic financial targets.

2. Prioritized Resource Allocation: By focusing on SOM, startups ensure resources are allocated to customer segments where they can drive the greatest impact, resulting in improved ROI.

3. Investor Attraction: Investors appreciate grounded SOM-based projections, which demonstrate that your business model is based on data and grounded in reality.

4. Effective Market Penetration: Focusing on SOM enables startups to develop a go-to-market strategy that maximizes their ability to capture market share, resulting in stronger initial traction and long-term growth. Implementing robust revenue operations strategies can enhance your ability to capture your Service Obtainable Market (SOM).

Strategies for Expanding SOM for Startups Over Time

Successful startups often expand their SOM by optimizing their product, brand, and market approach. Here are strategies for expanding SOM as your startup grows:

1. Strengthen Market Presence: Invest in brand visibility and customer success to enhance your SOM within the existing SAM. Targeted brand messaging and high customer satisfaction can create a more favorable market environment.

2. Optimize Customer Experience: Improving customer support, usability, and overall experience encourages higher adoption rates. Startups that prioritize user experience can increase their SOM as satisfied customers drive referrals and return for repeat purchases.

3. Geographic Expansion: Expanding into new regions can increase SOM. Startups may conduct pilot programs to assess potential success in new markets and gradually expand to maximize reach.

4. Innovate and Adapt Products: Continuously refine your product based on customer feedback and market trends. Enhancing features or adding complementary products can help open new segments within SAM, effectively expanding SOM.

5. Develop Strategic Partnerships: Partnering with complementary brands or service providers can expand your reach, enabling you to capture new customer segments or regions without significant overhead costs.

Final Thoughts on Service Obtainable Market (SOM) for Startups

For tech startups, understanding your Service Obtainable Market (SOM) is a crucial step toward sustainable growth. While TAM and SAM offer big-picture insights, SOM provides an actionable, realistic revenue target that aligns your growth ambitions with current capabilities. By carefully defining SOM, startups can secure investor confidence, improve resource allocation, and create a focused go-to-market strategy.

Ultimately, SOM is more than a number—it’s a pathway to achievable growth, sustainable market penetration, and incremental expansion. For any tech startup aiming to navigate the competitive landscape, a clearly defined SOM provides both a roadmap to follow today and a foundation for tomorrow’s growth.

Drive Focused Growth with Phi Consulting

Understanding and targeting your Service Obtainable Market (SOM) is just the start. Translating that insight into a growth strategy that resonates with investors, prioritizes resources, and accelerates your market penetration requires a strategic approach. At Phi Consulting, we specialize in helping startups like yours refine market strategies, from identifying SOM to implementing scalable go-to-market frameworks.

Why Partner with Phi Consulting?

• Tailored Market Insights: We analyze your TAM, SAM, and SOM in-depth to pinpoint your highest potential customer segments.

• Strategic Resource Allocation: Our team ensures your resources are directed where they’ll yield the best return.

• Investor-Ready Growth Plans: We help you build data-backed, realistic revenue projections to inspire investor confidence.

Ready to turn your market understanding into actionable growth? Partner with Phi Consulting to transform your market potential into real-world success.

Get in Touch and let’s start shaping your path to sustainable growth.