The market share of your business will determine what the likely revenue will be from your product or service. Understanding this key piece of market data will help when writing your business and marketing strategies, and planning your business budget.

Knowing how many customers you have access to, or have a preference to choose to purchase your type of product or service, can be difficult to determine. It can be more frustrating if you do not have a place of business – if you operate ‘on the road’ or on the Internet.

If you have an actual place of business, you can record how many people visit to make a purchase by counting them as they pass through the door. If you have an online business, you can do this by counting the number of unique visitors to your web site.

Unique visitors refers to the number of visitors that come to your site for the first time. In any month, you might have 6500 visits, but of these, only 4235 are unique visitors. The difference in the numbers is that some of those unique visitors came back for a second (or third) look.

In addition to finding out the number of customers (on average) you already serve you will need to know the potential number of customers that could buy from you.

If we look at our Case Study, Top Shelf Groceries, this gave the following results:

  • Average customers per month – 5464 calculated over a three-month period.
  • Total Potential customers – 3.2 million customers living in his City, with 145 000 living in the 10-mile radius near his shop.

Using this information, Steve was able to calculate his portion of the market. This is how he did it:

TSG Customers 100
————————— X ——- = xx %
Potential Customers 1

By putting in the numbers

5,464 100
————————— X ——- = 3.77 % total market share
145,000 1

Divide your customer visits by the total possible visitors to your business site (online or offline). This will give you a % of customers of the total available to you.

Using this information

This data is important as it will help you plan a realistic budget and financial projection for your business. This is important especially if you plan on obtaining a loan from a financial institution. They will want to know how you came to your predictions, and if it is realistic or just the hopes of a budding entrepreneur.

Steve knew from his research how far his customers would travel to buy from him. This gave him a geographic area to analyze. Using this data, he was able to calculate his market share of the customers in a 10-mile radius from his store.

Local councils are a great source of secondary data that can help you in this process. They often have profiles of their districts and suburbs that you can obtain for free, telling you how many homes and what type of population live in those homes (retired, large families, etc). This data can be used to provide a (rough) estimate of the total potential customers your business will have.

With Internet businesses, you will need to know how many people searched for a particular term that relates to your business. Choose the most popular term that relates to your site, and research how many people searched for that phrase.

Google provides a great keyword research tool that can help you find this information. Their results are based on the previous month’s searches.

Once you have your customer numbers and that of the potential market, simply plug the data into the equation to get the result and what you estimated market share will be.

Your research will now show you previous and expected results for the industry. It will also show you what your approximate market share is. You can use this data to produce a figure that you can use with your goals, budgets and overall expectation of your business performance.

Top Shelf Groceries Example

  • Industry Turnover – average of $935 million
  • Industry turnover by region (often data is broken into states or cities) – 24% of $935 million = $224 million
  • Region (city) population – 3.2 million customers
  • Potential region (population) for Top Shelf Groceries – 145 000 customers (representing 4.53% of 3.2 million)
  • Potential Industry region turnover for TSG – $224 million x 4.53% = $10,147,200 ($10.15 million)

Potential sales for TSG – $10.15 million x 3.77% (market share) = $382,549

The Next Step

Hopefully you have been able to use statistical data and research to generate a realistic figure in expected sales for your business. It may not be what you would like to see, but the result will tell you that if you maintain the level of growth and performance to match the industry, this figure shouldn’t be far from the ultimate result.

Now you have researched your industry and found out some more information to help fill the gaps in what you already knew. You know how many competitors are out there, and what the trend of the industry has been. You know if the industry is growing, leveling off, or declining. If you are starting a new business, this information will help you decide whether to pursue it or not.

You should also have a good idea – based on facts – what proportion of the market place is yours, and how much sales you can expect to make. The foundations for a strong and successful business have been built.

Now, you need to plan what your business will sell, how it will distribute its product or service and what the operational strategies will be to run the business. Once you have done this, you can move on to the business planning stage of the marketing and promotional strategies.

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