Serviceable Obtainable Market

While market size was stated as one large number, that number produced no decisions. "The domestic collaborative document market is $2.3 billion" says nothing about what this team should do next quarter.

The problem showed itself in investor meetings. Put $2.3 billion on a slide and the next question is how much of it you plan to take, and with no prepared answer out comes the line that even one percent would be $23 million. Why one percent, from which customers, and through which channel are all missing, so nobody listening believes the figure.

Serviceable obtainable market (SOM) is the innermost number invented to fill that gap. Where the outer number shows how much room the market has to grow, this one is a size you can use directly as this year's plan.

There are two ways to get there, and both usually get run, because a wide gap between them means an assumption somewhere is wrong.

1. Top-down — take the range reachable with the current product and channels, and multiply by the share you expect to hold. Attach evidence to that share: the number of competing products, your current share, and the share held by the market leader. In a market with five competitors where the leader holds 30 percent, an assumption that a new entrant takes 20 percent within three years does not survive review.
2. Bottom-up — multiply the number of customers sales and marketing can actually reach by the average contract value. Three salespeople meeting 20 companies each per month is 720 a year, and a 12 percent close rate leaves 86. At $3,800 a year per account that comes to $330,000.

Start with bottom-up. Every number in it lives inside the company, so when the result is wrong you can point at which assumption was wrong. A top-down figure moves entirely on one share estimate.

"Rebuild SOM bottom-up. A share assumption won't get past them."

Calculate it in the form where the evidence is internal numbers.

"If SOM is $330,000, this market alone won't get us to the next round."

The obtainable share falls short of the goal, so the scope needs redrawing.

"If those 3,400 companies are the SOM, what's this year's target?"

Market size and an annual target are two different numbers.

Pagedeck chose companies under 50 people building software as its beachhead market, the single segment to take first, and put the obtainable market inside it at 3,400 companies. Not a large number, but the arithmetic showed that winning 400 of them would be enough to reach the next stage. Grace and Sofia worked backwards from that 400 to set this year's sales headcount and the feature order.