How to Calculate Your Small Business Market Share

By Emily Suess

If you take the time to calculate your small business market share, you can measure how well you’re performing in comparison to your competitors. Simply defined, market share is the percentage of business that your business controls out of the total amount of business within your given market or industry.

Calculating Your Market Share

There are essentially two ways to determine how much control you wield within the market: by sales percentage or by unit percentage.

Calculating your market share by sales percentage is straightforward. Let’s say you sell sports apparel. If you sell $1 million in a target market that sells $5 million, your market share would be 20%.

($1 million / $5 million) * 100 = 20% Market Share

Calculating you market share by units sold is just as easy. Let’s say you sell 5,000 pairs of tennis shoes and your defined market as a whole sells 47,000 pairs of tennis shoes. Your market share would be 10.6%.

(5,000 pairs / 47,000 pairs) * 100 = 10.6% Market Share

Identifying the Variables

While the math for calculating market share is simple once you have the numbers, you may find it difficult to define your target market.

For example, should you include customers who also buy sports apparel at big-box stores in addition to other small business retailers? Probably! And you’ll need to find a way to include only sales data for relative products. That big box store sells everything from diapers to DVDs, and it won’t be relevant in your calculations.

That leads to another sticky point in calculating your market share—getting the rest of the market data. If you keep great records, you can pull your own numbers, but you’ll need to track down other industry stats. Sites like SBA.gov and FedStats.gov are a good place to start. You can also purchase market data from for-profit sources if necessary.

Quick Tips for Increasing Your Market Share

Once you crunch the numbers, you might decide it’s time to take action and increase your share of the market. There are several ways to accomplish this:

  • Add products: One way to increase sales is to add more products to your inventory. Not just any products will do, however. Survey your target market to find out what items they’d be most likely to purchase.
  • Adjust pricing: Dropping the prices on your products might move inventory, but increasing prices might generate revenue. Before you make price adjustments, you need a goal for building your market share and a plan for achieving it.

  • Add markets: Add new locations or cater to a wider demographic to grow your customer base.

  • Advertise more: Get the word out about your business through the channels your target audience uses most frequently. Name recognition is a major component of business growth.

Once you’ve determined your place among your competitors, you can compare business practices and develop a plan for increasing your control of the market. The larger your share of the market, the more potential income your business can generate.

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Emily Suess
Emily Suess is a full-time technical marketing writer in the software industry and a part-time freelance copywriter. To learn more about marketing your small business online, check out her copywriting blog, Say It With Me.

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