Calculating Your Market Share - X-Forces Enterprise
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Calculating Your Market Share

Market Share - XFE HUB

Put simply, market share is the portion of the industry that one company controls in terms of sales. If you’ve got a large share of the market, then you’ll likely have a higher profit margin too…

To work out your market share, calculate your total sales and divide this by the total sales of the industry in one time period.Example: let’s say you run a takeaway business and you made £100,000 in pizza sales last year, and the total market sales is £2 million. Your market share is five per cent.

Market share formula = total business revenue divided by total industry revenue. Keep in mind these variables and be consistent:

  • Time period – you could look at a financial year, one year, or multiple years
  • Products or category – are you going to look at one product within the industry or a broader category?
  • Unit sales or revenue – be careful comparing unit sales as the same products could have wildly different price tags
  • Global or domestic sales – it’s more common to look at market share by country as it’s easier to compare your own market, or you might even separate it by region

Take a look at the Office for National Statistics and Statista to understand more about business trends, economic influences, and consumer behaviour in your industry. However, market share can fluctuate, so make sure you're doing regular market research to stay ahead of the competition.

Market Share For New businesses

It can be difficult to work out market share potential for a new business. First, you’ll first want to understand market size (the number of potential customers), then you can look at the target market within that (who can you actually reach with your product or service). You can then look to grow your market share over a number of years in business.

Why Is Market Share Important?

As we’ve mentioned, market share can help to measure the profitability of a business in relation to its competitors. It’s as important as hiring and retaining staff and organising business insurance. Sometimes, one or two companies dominate the industry. For example, Statista data shows Apple iPhones and Samsung smartphones have a 42.4 per cent market share combined.

Depending on your product or service, there might be a few more competitors at the top with a smaller portion of market share. Market share can be a useful metric if you're looking for funding too, whether that’s through angel investors, venture capital, or a bank loan. You may also use it when valuing your business if you’re thinking of selling.

5 Tips For Increasing Market Share

  • 1. Find your niche

Make sure you find a way to stand out, whether that’s through the type of product you offer, technology you use, or design and branding. A clearly defined niche helps build a loyal customer base and sets you apart from your competition.

  • 2. Analyse your competitors

Keeping an eye on what your competitors are up to can help to identify emerging trends, new marketing opportunities, and pain points for your target audience. How does your product or service answer consumer needs? Can you offer something new?

  • 3. Stay on top of market trends

Be innovative and follow changing customer behaviour so your business can stay relevant. Perhaps you can develop a new product or adopt new technology in your restaurant that’ll make your customers’ lives easier. Holding focus groups, reading industry news, and keeping an eye on Google Trends can offer great insight.

  • 4. Get your pricing right

Price your products competitively and keep in mind how this impacts customer perception of quality and value for money. An introductory offer can be a great way to attract new customers without devaluing your brand. And don’t forget to keep an eye on your profit margin.

  • 5. Attract online reviews

Positive reviews build trust and help grow your customer base through word of mouth. Whether it’s a glowing review of your handcrafted product, or your warm customer service, reviews give an authentic view of your brand and help get you noticed

This article first appeared on the X-Forces Enterprise Knowledge Exchange Hub. Membership is free and provides access to a wealth of information, expert advice, and the opportunity to connect with one of our Business Captains – an experienced businessowner who can act as a mentor on your entrepreneurial journey.

Join the Hub, free of charge, today

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