1. What Is Market Size
Market size is the total potential demand for a product or service within a defined market over a specific period. It represents the maximum possible sales value or number of customers that could exist in the market.
Example: If there are 50,000 potential customers each spending £100 annually, the market size is £5,000,000 per year.
2. What Is Market Share
Market share is the portion of the total market that a specific company controls. It shows how much of the market’s sales your business generates compared to competitors.
Formula:
Market Share = (Your Company’s Sales ÷ Total Market Sales) × 100
Example: If your sales are £500,000 in a market worth £5,000,000, your market share is 10%.
3. Key Differences Between Market Size and Market Share
- Definition: Market size is the total opportunity; market share is your slice of that opportunity.
- Purpose: Market size helps evaluate potential growth, while market share measures competitiveness.
- Focus: Market size looks at the industry as a whole; market share focuses on your business’s performance.
4. Importance of Knowing Both
- Business Planning: Helps set realistic sales and growth targets.
- Competitive Analysis: Shows where you stand compared to rivals.
- Investment Decisions: Investors use both metrics to assess scalability and potential returns.
- Strategic Planning: Guides marketing, pricing, and expansion decisions.
5. Tips for Measuring Market Size and Share
- Use reliable data sources such as government statistics, industry reports, or trade associations.
- Update calculations regularly to reflect changes in the market.
- Segment markets by region, demographics, or product category for more accurate insights.
Frequently Asked Questions
Can a company have a large market share in a small market?
Yes — but growth potential may be limited compared to larger markets.
Why is market share important?
It indicates competitiveness and brand strength within the industry.
How often should I calculate market size and market share?
At least annually, or whenever planning major business decisions.
Conclusion
Market size and market share are key metrics that work hand in hand. Market size shows the total opportunity, while market share reveals how much of that opportunity your business captures. Together, they provide valuable insight for strategy, growth, and competitive positioning.