Long Math: Determining Your Market Share
One of the valuable reasons to belong to a business group or trade association is that they can help determine your role in your market. In some businesses, this can be relatively easy, like in automobile sales and real estate. Numbers are readily available to help place them in a pecking order in terms of local success. But what if you own a pizza place, an eyeglass company, or a jewelry store? Is it possible to determine your market share?
It can take a bit of research and may not be 100% accurate, but with some effort, you should have an idea on just how much business you may be missing out on.
Calculate the Total Market
How many people live in your trade zone, the area where most of your customers come from? For example’s sake, we will use 100,000 people.
Determine Average Annual Sales per Person in Your Product Category
Let’s say 95% of all people buy pizza each year, spending an average of $200 each annually. That would place pizza sales at $200 times 95,000 people, or a total of about $19 million.
You may have to do some really hard searching to find numbers that make sense for your business. If you sell eyewear, you would need to determine what percentage of people purchase eyewear, how often they purchase it, and what they spend on average annually on eyewear.
By searching enough, you will eventually find numbers that make sense and at least give you some estimate as to what your market share may be.
In our pizza example, a pizza place selling $1 million still would have less than a 5% market share.
As mentioned, a trade association may also help you in calculating your market share as well, but it can be an enlightening process.
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