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Estimating the size of the market and your share
After you have described your ideal customer groups using market segmentation, you will
want to tell readers of your business plan about the size of the potential market. The
size of the overall market, and your share, is important because it provides a gauge for
how large your business can become. If you can satisfy millions of customers with your
products and services, but you have a little or no market share, your business has a large
growth potential. Conversely, if you are in a small market and have a large market share,
your prospects for growth are limited.
Think of market size and share in terms of an apple pie. The size of the pie, 8",
12", or 16" is analogous to the size of your market, and the number of slices
comparable to your market share. For example, the market size and share of the Big 3 US
auto makers might be broken down as follows:
| US Car Market |
General Motors |
Ford |
Chrysler |
Total |
| Number of cars and trucks |
1,384,000 |
1,060,000 |
801,100 |
3,245,100 |
| Market share |
42.6% |
32.7% |
24.7% |
100.0% |
In this example the size of the pie is 3,245,100 cars and trucks, with: GM having a
little over 4 slices; Ford having little over 3 slices; and Chrysler with nearly 2.5
slices (in a 10 slice pie).
Make sure that you express market share in terms of units and dollars. In some markets,
it is possible for a business to have a small share of the units sold and a higher share
of the total dollar value. If the preceding example were expanded to include the entire US
automotive market, with other manufacturers like Rolls Royce, BMW, and Range Rover, the
number of units sold would increase as would the dollar value of the market. On closer
examination, you would find that luxury auto makers have a lower share of the units sold
relative to their higher share of the total dollar value of the market.
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