Journey of a Serial Entrepreneur

Icon

How to get from where you are to where you want to be

Non-Financial Metric #4: Market Share

“Failure to gain market share even with superior costs is failure to compete. This failure is also a failure to achieve even lower costs.” Bruce D. Henderson

There is substantial evidence which states that market share is directly related to ROI. With an increase in market share, a business can expect to benefit from economies of scale that ultimately lead to better operating margins. Therefore a business becomes stronger by gaining market influencing powers and equipping itself with quality management teams. Keeping track of market share is an important indicator in evaluating how business stacks up against the competition and how it progresses over time. In the early stages of starting out, a venture market research is a critical component of developing a business plan. This is usually a challenging exercise, because information regarding industries and markets is often not readily available. Listed below are some steps I use to evaluate the market and set market share targets accordingly:

1. The Industry: One needs complete information regarding growth rates of a particular industry. What are it’s historic trends? What were the revenue figures for the segment? Have any major technological innovations taken place in it recently? Is the industry very segmented? These are some preliminary questions of interest and importance when looking at an opportunity in a particular industry.

2. Competitors: This is an important segment, one in which you need to document as many direct and indirect competitors in the market place as possible. Look at their teams, products/services, pricing and any other marketing collateral which you can find. Remain constantly vigilant about your competitors, this is a must for any company regardless of size. Create document files which can be referenced easily, this will come in handy during later sections, when you are positioning and promoting your product as well.

3. Customers: Evaluate the target demographic that is going to be targeted. Is the segment growing? What are the current options that they are using in place of the product/service you will provide? How are they currently purchasing the product/service?

4. Market Factors: Are there any external factors which have a deep impact on your target market? These can be government policies, market consolidation and volatile raw material costs. The presence of these factors can have a substantial impact on your target market and must be taken into account.

Ultimately approximate size of market will be gauged. The most common metrics used for broad approximations are, sales by revenue & sales by volumes. Once we know an approximate size of the market we can set targets for ourselves. This metric can then be tracked periodically to ensure that we stay on course and alert to any fundamental market changes.

About these ads

Filed under: Advice, Marketing, Strategy, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: