Understanding the concept of market growth is important as it can tell an existing or startup company how well they can expect to perform in the near future. The metric also explains the position of a product or group of products in their life cycle. A prduct in a growing market is in the growth stage. In a reducing market the product is said to be in decline. Market growth is an important factor in determining the future direction of a business when writing a business plan.
Look for market analysis detailing the market growth for specific products created each year. Contact rival companies where market analyst information is not available and ask the competitor to share details of their sales over the last few years. Search tax records for a five year period for competitors to determine the number of products sold and profits over a number of years.
Determine how wide the market is for a product by looking at regional, national and international sales for similar products. Find information on annual sales for each rival company, the share of the market for each company in a region and the rate of growth as a percentage compared to previous years.
Calculate the percentage for market growth by dividing the rate of growth from the previous year by the current year. Calculate the average growth for a market by adding together the percentage growth of each company in a market and dividing the final number by the number of companies surveyed.
It can be difficult to determine market growth as competitors are not always prepared to share information with a rival company. Offering to share the results of a survey detailing market growth is a good way of enticing competitors to share information.
Tips and warnings
- It can be difficult to determine market growth as competitors are not always prepared to share information with a rival company.
- Offering to share the results of a survey detailing market growth is a good way of enticing competitors to share information.