What’s Your Slice of the Pie? Uncovering Your True Market Share
In the competitive world of business, it’s almost instinctual to be aware of the major players in your industry. Whether you operate a boutique jewelry store, run a real estate brokerage, sell eyewear, or sling pizzas, you likely have a mental list of the “big dogs” dominating your market. If you’re fortunate and have worked hard, your business might even be counted among them, a recognized leader with a strong presence.
Market leaders typically share several key characteristics. They’ve often been established for a significant period, allowing them to build substantial brand recognition and customer trust. They’ve likely cultivated a strong reputation for quality products or services and have effectively branded themselves, creating a distinct and memorable identity in the minds of consumers. These are all crucial elements to consider and strive for, especially if your business isn’t currently at the forefront of your market.
But beyond simply knowing who the leaders are, a more fundamental question often lingers: what exactly is your “fair share” of your particular market? Understanding this can provide valuable context for your business’s performance, highlight potential areas for growth, and inform your strategic decision-making.
Thankfully, in today’s digital age, gaining a general understanding of your potential market share is more accessible than ever. With the power of the internet and a little bit of detective work, you can piece together a reasonably accurate picture of the local economic landscape for your specific industry. Here’s a practical approach you can take:
Let’s illustrate this with a relatable example: you own a pizza place.
Your first step might be to conduct a broad online search. Try Googling a phrase like “How much money is spent on pizza each year.” You’ll likely be astounded by the sheer scale of the national pizza market. For instance, our research indicates that Americans consume approximately 3 billion pizzas annually, translating to a staggering $38 billion in sales. While this national figure is interesting and highlights the overall demand for pizza, it doesn’t yet provide the localized insights you need.
To narrow your focus, we need to consider the population of your specific market. Let’s say your pizza place is located in a town with a population of 100,000 people. To estimate the total annual spending on pizza within your local market, we can leverage the national per-person spending. Dividing the total national pizza sales ($38 billion) by the total US population (approximately 330 million people) gives us an average annual pizza expenditure of roughly $115 per person.
Now you’re getting closer to understanding your local market! If your town has 100,000 residents, the total annual spending on pizza within your market is likely around $11.5 million (100,000 people multiplied by $115 each).
With this estimated total market size, you can begin to assess your own business’s performance. By comparing your annual sales figures to this $11.5 million benchmark, you can determine your current “piece of the pie.”
Furthermore, you can gain additional competitive insights by identifying the number of pizza places operating in your town. A simple online search for “pizza places in [your town name]” or a review of local business directories can provide this information. Let’s say, for the sake of this example, that there are 75 pizza places listed in your area.
If we were to assume that all pizza places in your town capture an equal share of the market (though this is rarely the case in reality), we could divide the total estimated market sales ($11.5 million) by the number of competitors (75). This calculation would suggest that, under perfectly even distribution, each pizza place would have approximately $153,333 in annual sales.
While this equal distribution scenario is a simplification, it provides a valuable baseline for comparison. If your actual sales are significantly higher than this figure, it suggests you might be outperforming the average competitor. Conversely, if your sales fall considerably short, it could indicate areas where you might need to focus your efforts to attract more customers.
Ultimately, there are various methods to approach the calculation of your total market share, but the fundamental principle often boils down to estimating the average annual spending per person on your specific product or service and then multiplying that figure by the population of your target market. While this approach may not yield an exact figure, it provides a valuable and often inspiring general idea of the economic activity within your local business segment.
So, take some time to put on your detective hat and give this exercise a try. You might be surprised by the size of your local market and the potential opportunities that exist.
And while you’re busy crunching those numbers and gaining a clearer understanding of your market landscape, don’t forget to ensure that your business is adequately protected. Just as you’re analyzing your competitive position, it’s crucial to have the right business insurance coverage in place. Contact one of our independent business insurance experts today for a free, no-obligation quote and ensure your hard work and investment are shielded from potential risks.
