White Paper: Determining B2B Market Size And Market Share

A BizCompare White Paper
October 2010

Determining B2B
Market Size and
Market Share

By: Geoff Vincent
Founder & CEO
BizCompare Inc.

Determining B2B Market Size and Market Share - Introduction

You’re the CEO of as growing B2B business. While things have been going great, you don’t 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?

Let’s get started!

Copyright Geoff Vincent BizCompare Inc. 2010
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Determining Industries and Market Size – The Cheap and Cheerful Method

Here’s a 4 step process that won’t take you longer than a few hours to complete. When you are
done, you’ll 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 largest customers
and another 20-25 of your fastest 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 your
analysis. 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 the NAICS code for each customer.

One customer at a time, cut & paste the customer’s name and address into Google. Here’s
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 company’s
NAICS code. Example:

Page | 3

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 in
separate 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” or “filter” 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? You’ll likely see a
classic 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 Business
Support 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 you’re 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. Let’s 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 rep’s 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 the
accuracy of the data in your list.
 They will return your database with extra data appended to each matched record
that 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. They
have 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.

Let’s 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

Page | 6

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 $276
Total 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 of basic 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 I’ve outlined above. Also, in this example, we matched 4,000 and having that as our
sample set should deliver a statistically accurate outcome. So it’s not absolutely necessary
to have a high match rate to get your desired outcome, which is a profile of your best
customers.

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 customer’s 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 key
firmographic 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. I’ll show you examples of
these in a moment.

How to do the analysis: There are probably a number of methods and softwares that can
enable you or someone on your staff to do these analyses. I prefer to use the Pivot Table
function in MS Excel because it’s a commonly used software and (for me) it’s not too
difficult to learn. Here’s a good introductory video about Pivot Tables.

The purpose is to take our 4,000 lines of data and collapse it into useable tables. In other
words, we’re 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
Page | 7

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.

Let’s do an example using our 4,000 matched database scenario. You’ll use Pivot Tables to
develop summarized tables for Sales Volume, Employees and NAICS code. Here’s a view of
the tables you should build using the Pivot Table function:

Sales Volume:

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% Over 76% of your customers have
$50MM - $100MM 237 5.92% sales volume between $500,000 and
$100MM - $200MM 149 3.72% $20 million. Your sweet spot are all
$200MM - $500MM 19 0.47% companies within this sales volume
$500MM - $1 Bill. 19 0.47% range.
Over $1 Bill. 43 1.07%
Grand Total 4000 100%

Number of Employees:

Employee Range Customer # Customer %
1-9 1501 37.53%
10 - 24 886 22.15%
25 - 49 614 15.35%
50 - 99 425 10.63% Almost 86% of your customers have
100 -199 312 7.80% between 1 and 99 employees. Your
200 - 499 57 1.43% sweet spot are all companies within
500 - 999 40 1.00% this employee range.
1,000 or more 165 4.13%

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Top Industries (by NAICS):

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% Your customers are
561499 All Other Business Support Services 100 2.50%
56151 Travel Agencies 95 2.38%
derived from 153
561591 Convention and Visitors Bureaus 91 2.28% different industries
561599 All Other Travel Arrangement and Reservation Services 88 2.20% but only 19 NAICS
561611 Investigation Services 82 2.05%
industries make up
561612 Security Guards and Patrol Services 79 1.98%
561613 Armored Car Services 77 1.93% 76% of all customers.
561621 Security Systems Services (except Locksmiths) 65 1.63% Your sweet spot are
56171 Exterminating and Pest Control Services 59 1.48%
all companies within
56172 Janitorial Services 58 1.45%
56174 Carpet and Upholstery Cleaning Services 55 1.38% these 19 industries.
56179 Other Services to Buildings and Dwellings 49 1.23%
All others (134 NAICS codes) 940 23.50%
Total 4000

Customers by State:

State Customer # Customer %
NY 454 11.35%
IN 375 9.38% Optional information: With more than
PA 345 8.63% 70 percent of customers coming from
FL 306 7.65% just 10 States, this can show either
TX 269 6.73% a) regional strengths to build on OR
CA 247 6.18% b) a missing opportunity to expand
OR 239 5.98% into under penetrated States.
OH 226 5.65%
NH 195 4.88%
NV 188 4.70%
Others 1156 28.90%

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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 company’s best customers:

Sales Volume: $500M - $20MM

Employee Size: 1 - 99

Top Industries: 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 Bureaus
561599 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

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 the
firmographic 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
company’s best customers and ask for a count of all companies that match that profile.
Easy!

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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% (to
broadly 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 size
companies 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 the
best 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 shouldn’t 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 and
have 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. Geoff’s 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 his blog and on Twitter.

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

Page | 12

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