One important metric to consider is the market share a business enjoys. A company that has a majority of the market could be very successful. A company with a deteriorating market share could be in trouble. The process to determine the market share involves two steps:

• Knowing the prospective business revenues which the owner will supply
• Estimating the overall market, which you will explore next

Several different measures of overall market can be determined by the following:

1. Consider the share of unit sales. For example, the local golf course finds out that all the courses in the nearby area host 100,000 rounds of golf annually. While, this particular golf course hosts 20,000 rounds annually. The market share is 20,000 divided by 100,000 or 20%.
2. Consider the share of customers served. For example, the local carpet cleaning company serves clients within 25 kilometers of the office. Using Canada Post Precision Targeter software it is possible to determine the number of households, apartments, businesses or farms within a present distance of the potential business. Further, a demographic filter can be applied in your search including household income, education and family structure. This free tool allows a comprehensive view of the households surrounding the business. Dividing the business customers —1,000—by the number of households in the nearby area—4,000—would give a 25% market share. However, the owner assumed that only 50% of the households had their carpets cleaned annually, and revised the realistic market to be 2,000; for then its share would be 50%. It becomes clear that calculating the market share is an estimate at best.

Identifying Market Share

Statistics Canada has a NHS (National Household Survey) Profile, 2011 that has population data points for individual communities. You may want to explore the profile in relation to your prospective business:

• The age profile may be helpful depending on your business.
• The ethnic profile may be helpful for restaurants or boutique food stores.
• The education levels would be important as a source of employees and customers.
• Available data on people in the labour force and those unemployed or out of the labour force may be helpful as a source of employees and customers.
• Transportation, length of commute and regular time of departure are also included in the report.
• The dwelling age, number of rooms and bedrooms, type of maintenance needed, and shelter costs as a percent of income.
• The gross and net income by range is included for both individuals and households.
• All the data is available for most large or small communities.

The next item to investigate is the potential impact of a change in ownership.

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Activity: Business Market Share

Before continuing to the next section, take some time to examine the market share for your business.

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