One of the things I like about playing with Google Earth is just the almost God-like feeling of zooming in from the planetary view all the way to my street and seeing my house. It's like a spaceship zeroing in on my house and cruising in at a few thousand miles per hour.

That's how I feel when I'm talking to companies who are identifying their total addressable market (TAM), serviceable addressable market (SAM), and serviceable obtainable market (SOM). They're zooming in on the map of the whole world (TAM), to a country (SAM), and down to a city (SOM).

And from there, they start identifying their Ideal Customer Profile (ICP), stick a flag in the ground, and say, "This is our ICP. They live in the SOM."

You see this in a lot of investor pitches where startups say, "Our SOM is $100 million, and we think we can get 10% of that market by Year One."

This is a big mistake because they're grossly overestimating what their TAM, SAM, and SOM are in the first place, and they're basing their ICP on the wrong market. That means their figures are off, and they're about to fall way short of their projections.

The mistake companies make is that they pick a street on our Google Earth map and decide the entire city is like that, therefore, that's what their SOM is like.

That's like a pepperoni manufacturing startup saying, "My ICP likes pepperoni on their pizza, so that means everyone who eats pizza must like pepperoni, too. And since the US consumes about 3 billion pizzas per year, we're going to sell enough pepperoni to cover 300 million pizzas."

Look, I like pepperoni, but I'm only good for about 30,000 pizzas myself.

So you see where the problem is, right?

Putting Your ICP in the SOM is a Bad Idea

When you put your ICP in your SOM, you're basically estimating how big the city is, the demographic makeup, and its economic strength based on that one street. That's going to lead to a lot of serious problems when it comes time to start projecting revenue.

Overestimating Your Market: What if you zoomed onto a bigger street? If you stumble upon one of the major streets in the city, you'll think your city (SOM) is way bigger than it should be. This will lead to unrealistic sales goals and disappointed investors. Overestimating your SOM can also lead to wasted resources and a misallocation of your sales and marketing efforts.

Missing Out on Opportunities: There might be other great streets in your city that you're missing out on. By focusing only on your favorite street, you could be missing out on a whole lot of customers — customers you never planned for or allocated your resources for. If you're a software company building a project management tool and you only focus on enterprise customers, you could miss the entire small business community. Or if you only focused on air freight companies, you might miss out on the entire trucking industry.

Difficulty Scaling: By focusing on only one SOM, it's hard to grow your business. What if something happened to it? What if regulations or a competitor blocked out that SOM for you? If you only focus on the one poorly-defined SOM, you'll miss out on all the others. For example, if your ICP is a specific type of manufacturer and there's a regulatory change that impacts that segment, your whole operation could be at risk.

The Benefits of Putting Your ICP in the SAM

But basing your SAM on your ICP is like exploring the whole country and picking your favorite city. Rather than picking your favorite street and defining the city based on that, you're starting bigger and then zooming into the smaller market.

The SAM (city) is a more focused area that better aligns with your product or service. The cities are filled with your ideal customers, and you can segment them further by specific characteristics, challenges, and desires.

By starting with your ICP, you create a detailed profile of the customer you need, and then you can go off and search for the city that has the most of those customers. The profile will include things like their industry, company size, revenue, job titles, pain points, buying behavior, location, and demographics.

Once you have built your ICP, you can then define your SAM by identifying the broader market segment where the ICP lives and then focusing on specific neighborhoods (segments within the city that align with your ICP). This is different from defining your SOM and zooming out.

Finding the right city (SAM) first allows you to do more strategic planning rather than being limited to the confines of a single street. This ensures that your SAM is not just a random selection of customers, but a strategic choice based on the best understanding of your ideal customer.

Realistic Expectations: You have a better idea of how big your city (SAM) really is. That means you can set realistic sales goals and avoid disappointments. This gives you a more accurate understanding of your SOM so you can plan more strategically.

Finding New Opportunities: You’ll discover other great neighborhoods and streets (segments), which will open up new possibilities and help you reach more customers. For example, if your software is targeted toward marketing teams, you may also learn that it's a good fit for sales teams.

Easier Scaling: By having a better understanding of your SOM, you can more easily expand to different SOMs that fall within the same SAM. Essentially, if you understand one particular neighborhood in one city, you can look for similar neighborhoods in other cities.

How to Better Define Your SOM

To better define your SOM, start by looking at the whole country (SAM). Break it down into different states (customer segments). Then, you can start to focus on the best states (ICP) for your business.
Here are some things to think about:

Customer Research: Talk to people in different states. Find out what they like and don’t like. This can involve surveys, interviews, focus groups, and social media listening.

Competitor Analysis: See who else is in the country and what states they’re focusing on. Look at your competitors' customer base to identify potential gaps in the market.

Market Trends: Pay attention to what’s happening in the country. Are new states (markets) emerging? Are old states declining? Stay updated on industry trends and economic indicators.

Identifying Actual Prospects

Once you understand your SAM, you can start to identify your prospects. This is like finding the actual people who live on the streets you’re interested in. Once you have created your detailed customer profiles using demographic, psychographic, firmographic, and behavioral information, use data analysis to find patterns.

Where do these people live? What websites do they visit? What social media platforms do they use? Use market research and analytics tools to identify the actual customers: CRM software like Salesforce or HubSpot to identify trends and patterns; data visualization software like Tableau or PowerBI, and account based software like Demandbase to uncover market trends directly tied to your company.

Finally, build relationships with those prospects. Attend their industry events, join online communities, and join their professional associations as an allied vendor.

You can avoid the biggest mistake that most companies make by basing your SAM on your ICP, not defining your SOM based on the original ICP. Define your city by finding the one that best fits your ICP profile; don't define a city based on a single street.