Knowing your worth as a company means more than just having a solid understanding of your discrete profitability. You also need to understand how your organization measures up next to your top competitors, and in the industry as a whole.
Having these critical fiscal facts in your back pocket can provide your organization with strategic advantages that allow you to take your product – and your company along with it – to the next level.
The first step is figuring out your company’s market share.
What is market share?
Market share quite literally means a given company’s share in the current market. In other words, your market share is the revenue percentage that your organization contributes to the overall sales value within your industry.
For example, auto industry giant Ford Motor Company made 13.87 percent of all vehicle sales within the US in 2019.
Market shares are typically measured within specific fiscal periods, although it can be useful to also understand your average market share over the lifetime of the business.
You may also measure your market share at different scales: these are most often defined by geographic regions. For example, in 2021, Netflix accounted for a 27 percent market share among video streaming services in the US, and 50.2 percent on the global stage.
Why is market share important to know?
Knowing your market share will initially indicate your company’s position within the greater industry; that is, your relative competitive potential as a business, measured against other organizations offering a similar product or service.
This in turn allows you to strategize various aspects of your business such as sales and marketing practices to increase your profitability, gain new clients, scale production and outreach, and make a bid for the position of market leader.
It can also give you critical insight into the practices and behaviors employed by your business rivals, allowing you to edge out the competition.
Finally, knowing your market share will give you an idea of when it’s safe to take a major business risk that could push your growth and profitability. If your organization owns a big enough portion of the global market, it might be time to introduce that experimental service strategy you’ve been saving for the right moment.
How to calculate market share
Now that you know the benefits that understanding your market share has to offer, here’s how to calculate the market share for your company.
How to calculate market share based on revenue
The method calculates your market share based generally on your organization’s total revenue within a given time period. Of course, if you offer a range of products or services, you can calculate the individual market share for each category for more specific insights. Here’s how it works.
Step 1: Choose the fiscal period which you wish to analyze. You may decide to look at your organization’s lifetime value, the current or most recent fiscal year, or even a specific month.
Step 2: Calculate your organization’s total sales within the given fiscal period as a dollar amount.
Step 3: Calculate the total sales for the industry as a whole within the given fiscal period. This will include the amount which your organization has contributed. For publicly traded industries, this number should be readily available online.
Step 4: Divide your organization’s total sales by the industry’s total sales. The result will define your market share as a percentage value.
Example: An SaaS startup had a total revenue of 900 million dollars in the year 2021. The total value of the SaaS market value overall in 2021 was roughly 145.5 billion dollars.
This formula would look like:
Market Share = 900,000,000/145,500,000,000 = 0.006
The SaaS company in this scenario has a market share of 0.6 percent.
How to calculate market share based on units sold
This market share calculation method is similar to the previous method except it uses the number of units sold rather than total revenue to generate a result. Here’s how it works.
Step 1: Choose the fiscal period which you wish to analyze.
Step 2: Calculate the total number of discrete units sold by your organization within the given fiscal period.
Step 3: Calculate the total number of discrete units sold within the industry as a whole. This will include the number which your organization has contributed.
Step 4: Divide your organization’s total number of units sold by the industry’s total number of units sold. The result will define your market share as a percentage value.
Example: A smart vacuum company sold 10 million individual units to consumers within the US in 2021. A total of 45 million vacuums were sold in the US across the industry as a whole.
This formula would look like:
Market Share = 10,000,000/45,000,000 = 0.22
The smart vacuum company in this scenario has a market share of 22 percent.
Comparing market shares
If you want to compare your market share to that of other organizations within the industry, you can use the above formulas to calculate market share for other companies and compare that percentage to your own. This will give you an even more precise understanding of your ranking, and tell you who you need to aim for if you’re going to become market leader.
You may also compare internal market shares between different products existing within the same category. While it shouldn’t be your first decision making tool, knowing the different market shares held by individual products offered by your organization may tell you which ones are worth keeping, and which are extraneous.
How technology use can indicate market share and competitor research
New technology is one of the most common ways modern companies can give their market share a boost. Whether that’s by offering the latest innovative product to their client base or leveraging technology to give them critical insight into the competition’s market position, keeping up with the demands of the digital age is sure to give your company a competitive advantage.
HG Insights can help competitor research and improve sales funnels
And that’s where HG Insights comes in.
While much of the revenue data you need to understand your competitor’s market share is readily available online, it is not always the most precise, accurate or up-to-date information available. But HG Insights unparalleled data insights lets you take a closer look at the competition’s spending habits and intake, so you know exactly who you’re up against in your unique industry.
HG Insights also offers intelligent market strategy and spend insights into your client base, giving you data you can leverage to get ahead in your industry and achieve market leadership. Sign up for a free demo today to see what else HG Cloud Dynamics has to offer.
