It’s the goal of many businesses to be the best in their field, which usually means selling the most products. It can be difficult to work out which business sells the most out of all the competitors in an entire industry, though. The commonly accepted way of working this out is by seeing who has the highest market share.
This article will provide some tips on how to increase your market share, which will help you eventually become the highest-selling business in your industry. The topics we’ll cover include:
- Defining market share
- Why increasing market share is important
- How to increase market share for a small business
- How Countingup can help manage your increased market share
Defining market share
All the people who buy products related to a particular industry are part of that industry’s market. The sales revenue your business makes in relation to the total sales revenue of all companies involved in your industry can be shown as a percentage. This is your market share.
You can calculate market share by dividing a company’s sales by the total sales made in their industry, then multiplying it by 100. The equation looks like this:
Two important things to remember when calculating market share are that the calculation is usually done for a given period, and using the currency most relevant to your business to calculate sales.
Doing the calculation for a given period ensures that the numbers involved are smaller and more manageable, which helps you do the calculation.
Using currency to calculate sales provides more useful data than using the actual number of sales made. The number of sales does not consider the value of the items sold and the amount of money made, so it may not give as clear a picture of how well you’re doing.
Here is an example of calculating market share, using these two facts and the equation we provided above:
In the example, your business has made £50,000 in sales over the last month, and the total sales made in the industry was £1,000,000. We can then put these figures into the equation to show that your market share is 5%.
Why increasing market share is important
Increasing your market share is a key part of growing your business. If you can’t improve your market share, you’ll not make enough money to properly develop your business. There are other sources of income, of course, but increasing your market share means that your business won’t need money from external sources to expand.
Increasing your market share will not only grow your company, but your reputation will as well. A higher market share means more customers, which means you’ll get some free marketing if these customers mention your business to their friends. Having a high market share is great if you’re trying to grow people’s awareness of your products or brand.
Calculating your market share is one of the many ways a business can measure its success. So if you’re increasing your market share, it’s a good indication that you’re doing something right.
Using your market share to measure your success is especially effective when comparing your prior market share to your current one. Since the result is a simple percentage, it’s a very clear indication of how much you’ve progressed.
The only significant disadvantage of using this method is that due to its simplicity, it’s hard to identify the reasons for any increases or decreases occur, as all you’ll get is a percentage/
How to increase market share for a small business
Conduct market research
It’s wise to do some market research before you even start a business, but market research afterwards can really help to increase your market share.
Market research means analysing the needs and preferences of the people you’re trying to sell your product to. If you perform some thorough market research, you can uncover valuable data that can help you improve your marketing and customer service. By doing that, you’ll be able to increase your market share.
Market research can also help identify other markets entirely. Your company will likely already have a target market — the group of customers your marketing and products are primarily aimed at. By performing market research, you may discover other potential markets that you can create products and services for. If you’re struggling to increase your share in your current market, this sort of change may help your business grow.
Re-examine your sales process
Increasing your sales is at the core of increasing your market share, so you’ll find that your market share will grow if you improve your sales technique.
Look at how you sell your products to customers, and how you attract new customers in the first place. Your sales process doesn’t just mean the actual act of customers making a purchase — you’ll need to analyse all the parts of your business that interact with customers if you’re looking to increase sales.
The sales pipeline is a helpful tool for this process. It’s a way of visualising the path people take from being potential customers to buying from your business. By splitting the customer journey into different sections using the pipeline, you can more effectively make changes because you can focus more on the individual sections.
Managing your increased market share
Increasing your market share means increasing your sales, which in turn means increasing your income. All this extra money will require you to put more time into your financial management, which can be difficult without accounting experience.
If you sometimes struggle with this task, consider using financial management software to make the job easier. Countingup is a great example of this kind of software.
Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are.
You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward!
Find out more here.