Serviceable Obtainable Market (SOM)

Serviceable Obtainable Market (also known as Share of Market, and almost always abbreviated as SOM) is the portion of the Serviceable Available Market (SAM) that a company can realistically capture. Think of it as the target market a company is actually aiming for with its current sales force, marketing strategy, distribution channels, and competitive landscape in mind. While its bigger cousins, the Total Addressable Market (TAM) and SAM, represent the “what's possible” dream, SOM is the “what's plausible” reality check for the next few years. For investors, particularly those practicing value investing, understanding the SOM is crucial. It grounds a company’s exciting growth story in the cold, hard facts of its current capabilities and resources, helping to distinguish between ambitious vision and achievable targets. It answers the most important question: “Given who you are today, how much business can you actually win?”

To grasp SOM, you first need to understand its place in the market-sizing hierarchy. Imagine you're analyzing a company that makes high-end, vegan-friendly running shoes. The market can be broken down into three progressively smaller, more realistic pieces:

• Total Addressable Market (TAM): This is the total global demand for a product or service. It's the biggest possible prize. For our shoe company, the TAM would be the entire global footwear market. It’s a massive, inspiring number, but completely unattainable for any single company.
• Serviceable Available Market (SAM): This is the segment of the TAM that your company's products or services can actually address. It's the market you could serve. Our shoe company can't sell to people who need formal dress shoes, so the SAM is narrowed down to the global market for athletic footwear. Still huge, but more focused.
• Serviceable Obtainable Market (SOM): This is the slice of the SAM that your company can realistically win. It's the target. Given our company's current brand recognition, online-only sales model, and focus on the vegan niche, the SOM is the portion of the athletic footwear market it can capture in, say, North America and Western Europe over the next 1-3 years. This is the number that matters for near-term revenue forecasts.

Grand visions are great, but value investors prefer to pay for present reality, not future fantasy. SOM is the perfect tool for this, as it helps you assess a business with a healthy dose of skepticism.

Management teams often love to talk about the massive TAM for their industry. It makes for a great slide in an investor presentation. However, a disciplined investor immediately asks, “That's nice, but what's your SOM?” This question forces a shift from a top-down analysis (looking at the big market) to a bottom-up analysis (looking at the company's specific ability to execute). A company claiming it will capture 20% of a market where it currently has 1% needs a brilliant, well-funded, and highly credible plan. The SOM helps you scrutinize that plan.

A company’s SOM is, by definition, its expected market share. Analyzing how this figure has changed over time tells a story.

• A growing SOM often indicates a strong competitive moat. The company is successfully taking share from rivals, suggesting its product, brand, or cost structure is superior.
• A stagnant or shrinking SOM in a growing market is a major red flag. It means competitors are outmaneuvering the company, even as the overall pie gets bigger.
• A tiny SOM in a huge SAM isn't necessarily bad; it could be a massive growth opportunity. But it requires you to investigate why it's so small and whether the company has a real strategy to change that.

How a CEO and their team discuss the SOM is a great litmus test for their credibility. Do they present a realistic, data-backed SOM based on their sales capacity and marketing budget? Or do they hand-wave and talk only about the giant TAM, implying that capturing it is just a matter of time? The former shows a management team grounded in reality, while the latter suggests a team that might be overly promotional or, worse, delusional.

Let's imagine a new company, “Brenda's Boutique Bikes,” that assembles and sells high-end, custom-fit electric bicycles in London.

• TAM: The entire global bicycle market (worth billions). Brenda can't possibly address all of this.
• SAM: The electric bicycle market within the UK, where she can legally sell and ship her bikes (worth millions). This is her serviceable sandbox.
• SOM: The portion of London's e-bike market that values custom-fitting and is willing to pay a premium price. Given Brenda has one physical store, a small marketing budget for local ads, and capacity to build 200 bikes in her first year, her SOM might only be a few hundred thousand pounds. This is her realistic, near-term goal. An investor would judge her performance on her ability to capture and grow this specific, obtainable market, not on the size of the global bike industry.

The Serviceable Obtainable Market is where corporate strategy meets the pavement. It's a pragmatic, short-to-medium-term target that reflects a company's actual ability to compete and win customers. For investors, it's a vital concept that cuts through the hype of big market numbers and focuses on what truly drives revenue and profit in the here and now: execution. Before you get swept away by a company’s grand vision, always ask: what is the serviceable, obtainable market, and how, exactly, are you going to obtain it?