SOM is a capacity calculation
The wrong method is taking 1-5% of TAM. It has no derivation and no failure mode, which is why experienced readers discount it entirely.
The right method starts from the channel: how many prospects can this specific go-to-market reach in the plan period, what proportion convert, and what do they pay. Multiply through, and SOM falls out as a consequence of a plan rather than a percentage of an aspiration.
The four inputs
- Reachable accounts per year through each named channel — outbound capacity, inbound volume, partner introductions.
- Lead-to-customer conversion, evidenced by your own pipeline where possible.
- Average contract value at the price you actually charge, not the list price.
- Retention over the plan period, because SOM is a stock of customers, not a flow.
A worked shape
| Input | Example | Where the evidence comes from |
|---|---|---|
| Reachable accounts | 6,000 / year | Rep capacity x headcount plan |
| Conversion | 3% | Own pipeline over last two quarters |
| ACV | £9,000 | Signed contracts, not price list |
| Year-3 SOM | £4.9m | Cumulative customers x ACV x retention |
Label every input
Mark each figure as verified, estimated or assumed. A SOM built on one verified conversion rate and three assumptions is still useful — provided the reader can see which is which and test the assumptions that move the answer most.
The free TAM/SAM/SOM builder runs this structure end to end and produces a printable summary you can drop into a memo.
Part of a guide
Market sizing: TAM, SAM and SOM done properly
How to build market size from the bottom up: what belongs in TAM, SAM and SOM, how to calculate serviceable obtainable market from channel capacity, and how sizing interacts with defensibility.