Market Share.size White Paper

8/6/2019 Market Share.size White Paper

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A BizCompare White Paper

October 2010

Determining B2B

Market Size and

Market Share

By: Geoff Vincent

Founder & CEO

BizCompare Inc.


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Copyright Geoff Vincent BizCompare Inc. 2010

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Determining B2B Market Size and Market Share - Introduction

Youre the CEO of as growing B2B business. While things have been going great, you dont really

know the true potential for your company. Specifically:

What is the size of the market that you play in?

What is your current market share?

The answers to these two questions are the foundation for your Marketing planning. The

challenge is how to answer these questions and have confidence in the numbers.

In this white paper, we will present two scenarios that any CEO or marketing leader can employ

to determine market size and/or market share numbers.

The first scenario is what I call the cheap and cheerful solution that costs nothing but time. It

answers the question:

What are all the general industries to which your customers belong? Approximately, what is the size of your market?

The second scenario is more involved (and will cost a bit of money) but will give you much more

detailed information such as:

What are all the specific industries to which your customers belong? More specifically, what is the size of your market? What are the predominant firmographics for your customers (i.e. sales, employees,

etc.)

What is the profile of your best customers? How many prospects match that profile?

Lets get started!


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Determining Industries and Market Size The Cheap and Cheerful Method

Heres a 4step process that wont take you longer than a few hours to complete. When you are

done, youll know approximately what industries you play in and the market size. Here goes:

1. Generate a short list of some of your CURRENT customers.This needs to be a list that is manageable but also large enough for some commonalities to

emerge (more on that later). I recommend you get a list of 20-25 of your largestcustomers

and another 20-25 of yourfastest growing customers*. You need their company name,

street address, city, state, zip and phone. Presumably, you would like to have dozens more

just like them. Put all this information in a spreadsheet.

*While I suggest a total of 40-50 customers, if possible I would advise trying to use more customers in youranalysis. This will just increase the sample size, ergo the accuracy level.

2. Indentify the industry to which your customers belong.This next step will take a few hours because you need to do some high level research on

each of your customers. However, this is an easy task so if you have an assistant, a sales

administrator or any person with some smarts and eye for detail, so you can delegate the

task. Objective: You want to indentify theNAICScode for each customer.

One customer at a time, cut & paste the customers name and address into Google. Heres

an example for a fictitious company: Sample Company 1234 Anywhere Ave Sacramento,

California 95838. A Google search would show a result as follows:

Look for search results for your customer in business directories (as highlighted above) like

BizCompare, Manta, AllBusiness or others.

Next, click on one (or more) of the business directory links and look for the companys

NAICS code. Example:
http://www.bizcompare.com/help/NAICS/http://www.bizcompare.com/help/NAICS/http://www.bizcompare.com/help/NAICS/http://www.bizcompare.com/help/NAICS/


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The number 561499 is the official NAICS numeric code. The words All Other Business

Support Services is the official NAICS description. Record the number and description inseparate columns in the spreadsheet beside each customer name. Repeat for all customers.

You now have 40-50 of your best customers all in one spreadsheet ready for analysis.

3. Now, indentify the DOMINANT industries by looking for industry patterns.Go to the NAICS description column and apply a sort orfilter function. Both actions will

deliver the same result which is to cluster companies by NAICS description. Now, perhaps

for the first time, you are looking at objective information telling you the specific industries

to which your best customers belong. What is the data telling you? How many unique

industries are there? What are the industries with the most occurrences? Youll likely see aclassic 80/20 rule emerge where about 80% of revenue will come from 20% of the

industries.

Starting with the ones that occur the most (the 20%) you now have your target industries to

help fuel your growth.

4. Look for the total number of companies in your target industries.Now you have your top NAICS industry descriptions and you want to find out how many

companies are in those same industries. You have a couple of approaches to choose from:

You can do a Google search using the industry phrase (5614999 - All Other BusinessSupport Services) and, again, look for sites like BizCompare, Manta, AllBusiness or a

government site like the U.S Census Bureau. Or

You can simply go directly to these sites and search/browse for your target industry.Either way, in short order, you will be presented with the number of companies for that

industry. Example:

Note: When looking for number of companies in a specific industry, there are bound to be

some variations between sites and database. So I suggest that you look at 3 or more sites to


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the see number of companies on each site, take an average or select a number youre most

comfortable with.

Complete! You now have:

Your dominant industry classifications Your approximate market size

Next steps:

You are now equipped to go to any business list provider and request quotes by providing

them with the NAICS industry classifications you just researched.


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Determining Industries, Market Size, Firmographics and Best Customer Profile

This is a somewhat more elaborate effort and it will cost some money but it will give you

substantially more detailed information to base your planning upon. Lets dive in:

1. Generate a list of your CURRENT customers.You want to generate a list of ALL your very good present customers. Eliminate dormant

customers, poor payers, perennial money losers (ones that you keep just for the cash flow

but would otherwise fire) and any other customers that, for whatever reason, you could

live without. Your list should now represent the customers that you would consider to be

your best customers. Put them all in a spreadsheet. For each customer, include company

name, full address with zip code, phone number and you might as well include any other

data at hand like their sales reps name, sales, average sale (if applicable), source (how they

came to you), etc., all in separate columns. Presumably, you would LOVE to have hundreds

more customers just like them.

2. Indentify the industry to which your customers belong.This next step is the part that will cost some money because you will need to engage a data

cleansing and append company. These companies maintain massive databases of virtually

all companies in the U.S. (and internationally) with rich information on each company. They

provide data cleansing and enrichment services and will also sell lists of companies for

marketing purposes.

They will take your database and, in general, do the following:

Apply an address correction software to your data (this helps with matching) Run your database against their universe of companies Endeavour to match each company in your database to the same company in their

universal database based on company name, street address, city, state and 5-digit

ZIP Code

The average percentage match rate is 30% - 60%, but varies depending on theaccuracy of the data in your list.

They will return your database with extra data appended to each matched recordthat can include employee size, sales volume and NAICS code (all recommended).

Cost: I researched one provider of this kind of service, a company called Melissa Data. Theyhave a minimum order fee of $500 but they charge based on the size of the initial database

you give them, the elements you want to append and the percentage match rate they

ultimately achieve.

Lets show an example using published pricing from Melissa data: You submit 10,000

records and you want employee size, sales volume and NAICS code appended to as many


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records as possible. They achieve a match rate of 40%. Their cost would look something like

this:

For 10,000 records Match rate Appended Price per 1000 Cost*

Employees range 40% 4,000 $60 $240

Sales volume range 40% 4,000 $60 $240

NAICS code 40% 4,000 $69 $276Total Cost $756

* Example: 10,000 x 40% x $60/M = $240

Match rate: You may wonder why only 40% or so are matched and this may seem low to

you. However, in the world ofbasic data matching, 40% is not a bad result. It is possible to

achieve a much higher rate, perhaps as high as 75% but that would entail a much more

elaborate matching process that comes with a price tag that is many multiples of the

solution Ive outlined above. Also, in this example, we matched 4,000 and having that as our

sample set should deliver a statistically accurate outcome. So its not absolutely necessary

to have a high match rate to get your desired outcome, which is a profile of your bestcustomers.

Confidentiality: You may have reservations about data security and the confidentiality of

your customer information in the hands of a third party. What I can tell you (and I worked

for Dun & Bradstreet for 10 years) is that companies who do this kind of sensitive data work

go to great lengths to handle a customers proprietary data with utmost care and security.

Frankly, they have to because if there was even a whiff of data security issues, it could do

serious harm to their business. In short, they have maximum incentive to handle your data

with extreme caution.

In this example, you would get your full database back and 4,000 of them will have this keyfirmographic info appended to it. This is your raw database to start the next phase of the

work.

3. Develop the KEY firmographics of your database.Using the matched data, you now want to do a few database exercises to give yourself

separate views of sales volume, employees, NAICS code and State. Ill show you examples of

these in a moment.

How to do the analysis: There are probably a number of methods and softwares that canenable you or someone on your staff to do these analyses. I prefer to use the Pivot Table

function in MS Excel because its a commonly used software and (for me) its not too

difficult to learn. Heres a goodintroductory video about Pivot Tables.

The purpose is to take our 4,000 lines of data and collapse it into useable tables. In other

words, were going to take data and turn it into information. When the raw data is

organized into summarized tables, you can quickly see where the numbers cluster. The
http://www.dummies.com/how-to/content/how-to-create-a-pivot-table-in-excel-2007.htmlhttp://www.dummies.com/how-to/content/how-to-create-a-pivot-table-in-excel-2007.htmlhttp://www.dummies.com/how-to/content/how-to-create-a-pivot-table-in-excel-2007.htmlhttp://www.dummies.com/how-to/content/how-to-create-a-pivot-table-in-excel-2007.html


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clusters for any given firmographic element are what I call the Sweet Spot and all of the

sweet spots combined provide a Best Customer Profile. Please note that you are the one

who identifies the sweet spots. The pivot table function does not do this for you. This is

where your best judgment comes into play.

Lets do an example using our 4,000 matched database scenario. Youll use Pivot Tables to

develop summarized tables for Sales Volume, Employees and NAICS code. Heres a view ofthe tables you should build using the Pivot Table function:

Sales Volume:

Number of Employees:

Sales Volume Customers # Customer %

$1 - $500M 181 4.52%

$500M- $1MM 1390 34.75%

$1MM - $5MM 1142 28.56%

$5MM - $10MM 313 7.82%$10MM - $20MM 231 5.76%

$20MM - $50MM 278 6.94%

$50MM - $100MM 237 5.92%

$100MM - $200MM 149 3.72%

$200MM - $500MM 19 0.47%

$500MM - $1 Bill. 19 0.47%

Over $1 Bill. 43 1.07%

Grand Total 4000 100%

Employee Range Customer # Customer %

1 - 9 1501 37.53%

10 - 24 886 22.15%

25 - 49 614 15.35%

50 - 99 425 10.63%

100 -199 312 7.80%

200 - 499 57 1.43%

500 - 999 40 1.00%1,000 or more 165 4.13%


Over 76% of your customers have

sales volume between $500,000 and

$20 million. Your sweet spot are all

companies within this sales volume

range.

Almost 86% of your customers have

between 1 and 99 employees. Your

sweet spot are all companies within

this employee range.


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Top Industries (by NAICS):

Customers by State:

NAICS Code NAICS Description Customer # Customer %

561421 Telephone Answering Services 695 17.38%

561422 Telemarketing Bureaus and Other Contact Centers 445 11.13%

561439 Other Business Service Centers (including Copy Shops) 325 8.13%56144 Collection Agencies 216 5.40%

56145 Credit Bureaus 191 4.78%

561491 Repossession Services 155 3.88%

561492 Court Reporting and Stenotype Services 135 3.38%

561499 All Other Business Support Services 100 2.50%

56151 Travel Agencies 95 2.38%

561591 Convention and Visitors Bureaus 91 2.28%

561599 All Other Travel Arrangement and Reservation Services 88 2.20%

561611 Investigation Services 82 2.05%

561612 Security Guards and Patrol Services 79 1.98%

561613 Armored Car Services 77 1.93%

561621 Security Systems Services (except Locksmiths) 65 1.63%

56171 Exterminating and Pest Control Services 59 1.48%56172 Janitorial Services 58 1.45%

56174 Carpet and Upholstery Cleaning Services 55 1.38%

56179 Other Services to Buildings and Dwellings 49 1.23%

All others (134 NAICS codes) 940 23.50%

Total 4000

State Customer # Customer %

NY 454 11.35%

IN 375 9.38%

PA 345 8.63%

FL 306 7.65%

TX 269 6.73%

CA 247 6.18%

OR 239 5.98%

OH 226 5.65%

NH 195 4.88%

NV 188 4.70%

Others 1156 28.90%


Your customers are

derived from 153

different industries

but only 19 NAICS

industries make up

76% of all customer

Your sweet spot are

all companies withi

these 19 industries.

Optional information: With more than

70 percent of customers coming from

just 10 States, this can show either

a) regional strengths to build on OR

b) a missing opportunity to expand

into under penetrated States.


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Our final analytical step is to combine all of these Sweet Spots into one profile.

This is the firmographic profile of this companys best customers:

You now have statistically reliable data that tells you:

Your best industries Your best customers by size for sales volume and number of employees Your best geographic markets

4. Determining Market Size and Market Share.This last task is easy and should not cost any money to accomplish. Equipped with thefirmographic profile of your best customers, you now want to determine how many other

companies match that same profile ...this is the market size.

You simply go to a business list provider, give them the firmographic profile of your

companys best customers and ask for a count of all companies that match that profile.

Easy!

561421 Telephone Answering Services

561422 Telemarketing Bureaus and Other Contact Centers

561439 Other Business Service Centers (including Copy Shops)

56144 Collection Agencies

56145 Credit Bureaus

561491 Repossession Services

561492 Court Reporting and Stenotype Services

561499 All Other Business Support Services

56151 Travel Agencies

561591 Convention and Visitors Bureaus561599 All Other Travel Arrangement and Reservation Services

561611 Investigation Services

561612 Security Guards and Patrol Services

561613 Armored Car Services

561621 Security Systems Services (except Locksmiths)

56171 Exterminating and Pest Control Services

56172 Janitorial Services

56174 Carpet and Upholstery Cleaning Services

56179 Other Services to Buildings and Dwellings

$500M- $20MM

Employee Size: 1 - 99

Top Industries:

Sales Volume:


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Determination of market share: In this example, we would ideally want to identify the

number of customers (of the 4,000) that have all three of the firmographic characteristics in

common. If you have an analyst who can do this data manipulation, then you can take the

resulting number and divide by the market size and you now have your market share. In the

absence of this analytical skill set, I would be satisfied with simply taking the number of

customers who match by industry code, adjust that number down by 20% to 25% (tobroadly reflect sales volume and employees). Use the resulting number and divide by the

market size and you now have your market share.

A few final thoughts about this approach:

The methodologies described above are intended for use by small or medium sizecompanies who require good estimates of market size and market share but do not

have the resources to hire staff or organizations that do this for a living (and charge

significant fees for their services). In other words, either of the solutions above will

provide good estimates of size and/or share but are not a substitute for an intensive,robust market size and share exercise but which could easily be a five or even six figure

investment.

The so called sweet spot ranges for sales and employees are intended to show thebest ranges to target. These are the niches that your current sales and marketing efforts

would indicate to be your best bets for new customer acquisition. However, that is not

to say that one shouldnt target prospects that fall outside these ranges. In fact, you

may have a business growth strategy that specifically targets companies that fall outside

these ranges. My one suggestion would be to test these secondary ranges and analyze

the results before going full steam ahead with expensive acquisition programs.

Lastly, I currently do not have any kind of commercial relationship with Melissa Data andhave not personally experienced their abilities regarding data cleansing and append

services. Please proceed using our own best judgment on what company you might like

to engage with this kind of project.

All the very best,


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About the Author:

Geoff Vincent is the founder and CEO of BizCompare Inc. which owns and operates

www.bizcompare.com. Geoffs background includes a plethora of senior marketing

and management positions at leading B2B companies including American Express, FedEx, CCH and

Dun & Bradstreet. Geoff can be followed at hisblogand onTwitter.

About BizCompare.com:

The Bizcompare.com site is a business information portal that features over 100 industry research

reports and 1.5 million company profiles focused on the business services vertical. Popular uses for

the site include market research, lead generation, competitor analysis and B2B marketing planning.

The site displays key firmographic information in insightful graphs so one can compare companies

to their peer group for greater context.

Quick links: BizCompare home page

Browse our 19 industrial categories to drill down to 108 specific industries

See a sample industry research report

See a sample company profile
http://www.bizcompare.com/http://www.bizcompare.com/http://www.bizcompare.com/blog/http://www.bizcompare.com/blog/http://www.bizcompare.com/blog/http://twitter.com/BizComparehttp://twitter.com/BizComparehttp://twitter.com/BizComparehttp://www.bizcompare.com/http://www.bizcompare.com/http://www.bizcompare.com/industries/http://www.bizcompare.com/industries/http://www.bizcompare.com/industries/details/Building%20Inspectors_1770http://www.bizcompare.com/industries/details/Building%20Inspectors_1770http://www.bizcompare.com/companies/company-info/Paper-Shredding-%26-Recycling-Fundraising-and-more/Sample-Company_1528896http://www.bizcompare.com/companies/company-info/Paper-Shredding-%26-Recycling-Fundraising-and-more/Sample-Company_1528896http://www.bizcompare.com/companies/company-info/Paper-Shredding-%26-Recycling-Fundraising-and-more/Sample-Company_1528896http://www.bizcompare.com/industries/details/Building%20Inspectors_1770http://www.bizcompare.com/industries/http://www.bizcompare.com/http://twitter.com/BizComparehttp://www.bizcompare.com/blog/http://www.bizcompare.com/

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