How to Calculate Market Share for Your Business Marketing Plan - dummies

How to Calculate Market Share for Your Business Marketing Plan

By Steven D. Peterson, Peter E. Jaret, Barbara Findlay Schenck

Sooner or later in the world of business, some banker, advisor, or partner will ask you about your market share. Market share is the portion your business captures of all the sales of products like yours in your market area. These definitions and calculation approaches will help you prepare your answer.

You can calculate your market share by units sold, customers served, or dollar volume. Following are examples of each approach:

  • Share of unit sales: The manager of Open Fairways Golf Course discovers that all the courses in the market area together host 50,000 rounds of golf a year. Of those rounds, Open Fairways hosts 7,000, for a 14 percent market share. (7,000 ÷50,000 = 0.14)

  • Share of customers served: The owners of Immaculate Carpet Cleaning serve homes within 15 miles of the business. That area includes 2,000 homes. However, the Immaculate owners estimate that only half of the area’s homes — 1,000 homes — are potential customers for carpet-cleaning services. The company currently cleans carpets in 125 homes a year, giving it a 12.5 percent market share. (125 ÷1,000 = 0.125)

  • Share of dollar volume: The owners of Forever Green Landscaping operate in a market area where homeowners and businesses buy a million dollars worth of landscaping services annually. Forever Green has sales of $100,000, or 10 percent market share. (100,000 ÷1,000,000 = 0.10)

Some companies track market share using several of these calculation approaches. However, many companies have access to only one of the market size statistics, so they base their market-share assessments solely on that calculation approach.