How to calculate market share for your business
3-minute read
Working out market share for your business can help you to understand the size of your company in relation to your competitors.
Whether you’re researching the potential of a new startup or looking to grow your business, knowing where you fit into the market is an essential part of any business strategy.
Here, we explore how to measure market share plus tips for increasing market share when you’re ready to grow.
What is market share?
Market share is the percentage of sales one business generates in a particular industry. You’ll usually look at revenue/turnover for this, although you can use unit sales.
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.
The term ‘market leader’ is reserved for the company that has the largest market share.
How to work out market share
To work out your market share, calculate your total sales and divide this by the total sales of the industry in one time period.
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.
Market share can fluctuate, though, so make sure you're doing regular market research to stay ahead of the competition.
Market share 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.
Estimating potential market share for a new business
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.
If you’re looking for more ways to see whether your company is profitable, take a look at ROI (return on investment), business turnover, and EBITDA.
You can also read about using retained profit to finance growth and increase market share.
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? Our guides to competitor analysis and SWOT analysis can help you here.
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. Read our guide to getting Google reviews for more tips.
Do you have any more questions about how to calculate market share for your business? Let us know in the comments section below.
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Written by
Catriona Smith
Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
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