12 Oct Determining Where You Stand in Your Competitive Market in Terms of Market Share
Determine your market demand and market share in 7 simple steps
Where do you stand in comparison with your competitors in terms of market share and number of bankruptcy filings? How can you determine your market share, and how can you make a plan to increase your market share amidst heavy competition?
One of the most important things you can do as an attorney is to analyze the bankruptcy market in your area and determine what the demand for bankruptcy has been, what it is, and what it likely will be in the coming years. In addition to gauging demand, you should determine what percentage of the market you have had, what you have, and what you could have based on how aggressively you market yourself.
As you gain a firm understanding of the market in your area and your potential market share, you will have a “big picture” view of what you are achieving and what you can achieve with your marketing. Then you can make specific, actionable goals for achieving a realistic market share.
Determine your market demand and your market share by following these steps. For an example, we will use Nashville, Tennessee to determine what the market demand and potential market share would have been for a fictitious attorney in 2012. We recommend using City-Data.com and U.S. Court data to help you find the information you need.
Step 1: Determine What Area You Want to Do Business In
First, you need to decide where you want to do business and highlight the area on a map. This will help you focus your research to specific areas.
Our fictitious attorney, whose office is in downtown Nashville, wants to market his law firm in Middle Tennessee, with a radius of about 40 miles, which covers 7 counties around the Nashville area. Here is a map of the targeted area.
Step 2: Determine Population of Target Area
Your market demand for bankruptcy directly correllates with the population size of your area. Whether you live in Los Angeles, California or Lincoln, Nebraska, the amount of bankruptcy filings will vary greatly in large part due to population. All other factors being equal, the higher the population, the higher the bankruptcy filings. Determine your state, court district, county, and city population size.
Using City-Data.com, we researched population sizes for our attorney. Here are the population sizes of the target market of our fictitious attorney in Nashville from 2012:
- Tennessee population: 6,456,000
- Population of targeted counties near Nashville: Williamson: 179,955; Rutherford: 258,461; Wilson: 112,454; Sumner: 158,689; Robertson: 65,680; Cheatham: 39,073; Davidson: 620,596; All targeted counties combined: 1,434,908
- Nashville population: 620,596
Step 3: Determine How Many People File Bankruptcy in Your Target Area
On a national level, about 0.4% of the population files bankruptcy each year. In 2012, of a population of about 313,000,000, there were 1,261,140 bankruptcies. This means that if your area follows the national average, for every 1,000 people in your area, 4 people will likely file each year. However, the per capita bankruptcy filing rate varies quite a bit based on area. You can easily determine the per capita bankrutpcy filing rate by taking your state population and dividing it by the number of state bankruptcy filings. Then repeat this with your county or district.
In our example, based on U.S. Court Data, Tennessee actually has the highest per capita bankruptcy filing rate in the country.
- Tennessee per capita rate: 32,940 bankruptcy filings / 6,456,000 people = .0051. In other words, for every 1,000 people in Tennessee, 5-6 people file bankruptcy.
- Middle Tennessee bankruptcy filings: 12,223
- Estimated bankruptcy filings in the 7 targeted counties: Since most counties in the Middle Tennessee court district outside the targeted 7 counties are rural, about 67% of bankruptcy filings (8,000) occur in our targeted area.
In summary, the total market size for the 7 counties our fake attorney wants to target is about 8,000 filings per year, or 667 filings per month. For every 1,000 people in this area, about 5-6 people will file bankruptcy each year. There is a very solid demand for bankruptcy in this area.
Step 4: Determine Competition and Number of DIY filers
Once you know your population, per capita filing rate, and total number of filings per month in your target area, you can now start to estimate what percentage of this total demand you feel you can capture. This is influenced by the number of competitors in your area and the number of people that file bankruptcy without professional help. You can use public court records and online searches to determine these metrics. You will quickly discover which law firms in your area file the most cases and are your biggest competitors. The more firms in your area, the harder it will be for you to increase market share.
Using search engines, we determined that in the 7 targeted counties, there are around 50 law firms that practice bankruptcy law. Also, we assume that 5% of filers file themselves instead of hire an attorney. Therefore, of the 8,000 filings each year, 7,600 are with attorneys. If those were equally distributed among all attorneys in the area, each law firm would file 152 cases a year, or 13 cases a month, and each firm would have a 2% market share. Currently, our fictitious attorney is only filing 8 cases a month, meaning he is below the average volume of his competitors and only has a 0.8% market share.
Step 5: Estimate Your Market Share Based on Your Level of Marketing Effort
The percentage of the market that you capture is greatly influenced by how aggressively you market yourself. Since there are so many attorneys fighting for market share, it is probably unrealistic to expect to gain a large chunk of all bankruptcy filings. But by increasing your filings, you can increase your income, so it is worth considering how feasible it is to market yourself. You should project your estimated market share based on mild, moderate, and aggressive marketing efforts.
Our fictitious attorney in Nashville currently has a 0.8% market share and files 8 cases a month. He is doing some marketing, but doesn’t focus much on it. He decides that he wants to double his case load to 16 cases a month and increase his market share to 1.6%. To do so, he decides he’ll market himself more aggressively. If his marketing goes well, he decides he wants to open another office, increase his marketing, and hopefully gain a 2.4% market share, or 24 cases a month. After researching his area, he determines that his competitors are marketing themselves, but not overly aggressively, so he feels his plan is possible.
Step 6: Compare Filing Trends to Past Years and Forecast Future Demand
Bankruptcy demand fluctuates quite frequently due to political, cultural, and economic trends. You should determine the health of your industry by gauging demand based on past filings. Then, you should consider whether filings are likely to increase or decrease. If filings are increasing, you may decide to be more aggressive in your marketing to capture greater market share. If the market is shrinking, you may consider how to maintain current market share and how to diversify into other legal areas.
Our attorney notices that filings have fallen 10-15% each year since 2010, but are holding strong and seem to be flattening out. He realizes that the bankruptcy market is not growing since the economy is recovering, but he also feels that the economy will not fully recover for years. He decides to increase his market share in the hopes that bankruptcy filings will remain consistent and will not decrease much in the coming 2 years.
Step 7: Putting It All Together
After your analysis of your market demand and your market share, you will have a good idea as to how many cases you can file each month and how many you could file based on how you market yourself. You will also be able to forecast future demand and make plans for keeping or increasing market share. Repeat this analysis 1-2 times a year and you will stay on top of market trends and maximize your market share.