Source: www.businesspartners.co.za

Having established the number of people or consumers that make up your market, you can estimate the total purchasing power, provided you have information regarding the average amount spent by such consumers each year on your commodity or service.

If you can afford it, it may be worthwhile consulting with some market research specialists who are able to put together such estimates with greater accuracy than the average businessman or woman.

You could use a system called "regression analysis" to draw fairly accurate conclusions about the size and potential of the market for virtually anything.

Having established in the previous steps the size of your total market, you are then faced with the challenge of deciding how much of the total you can reasonably expect as your own share. It also depends on your own competitiveness in terms of quality, price and service.

To answer the question of what share you can expect, you need to begin with assessing the extent of your competition.

• Where are your potential customers getting their products or services from right now?
• How well are those suppliers, your competitors, doing their jobs?
• Are they inefficient, and does their service lead to many complaints? Does an examination of your competitors suggest ways in which you could give a better service or give better value for money?

It is also worthwhile dividing the total market by the number of competitors that exist in that market. If, for example, you have decided that your market size is a total of 100 000 units, selling for R300 000 annually and there are present only four suppliers in competition with each other, you have thereby established that the average supplier at present has a market share of 25 000 units giving him/her revenue of R75 000 annually.

The question you then need to ask yourself is whether you could in a reasonable period of say, 3 years from starting, expect your business to grow to at least the average market share of 25 000 units and R75 000 annually.

You will realise that to do this, you will need to take some business away from the existing suppliers, thus increasing the extent of the competition. Or you may have reason to believe that the total market will grow rapidly by the injection of new customers so as to allow you to reach this level in a short
period of time.

The more competitive the situation is, the tougher it is for any one supplier, especially a new one, to gain a share of such a market. His/her competitors will of course try to make it difficult for the newcomer to gain a share.