Some of us want to grow. Some of us don’t. If you’re part of that group bitten by the growth bug, at some point you start wondering how big your practice can get.
It’s Actually Important to Know
This isn’t a purely academic question. You market your practice differently when you’re growing. You spend more money on marketing, and you spend it on different things than you do if you’ve already achieved market dominance. You really need to know where you stand in your marketplace.
I started wondering about how to figure this all out a few years ago and did some digging.
There Is a General Rule: 30%
The conventional wisdom is that it’s tough to exceed a 30% market share. Some businesses go beyond that point, but most peak at about 30% if they’re ever fortunate to grow that much. After reading a bunch and talking to a fair number of experts, I concluded that 30% is probably a reasonable maximum for a family law practice.
Where Do You Stand Now?
The question then becomes, what’s the size of the market? You can’t measure your share of the market without knowing the overall market size.
We hired a graduate student at a local university working on his doctoral degree in statistics. He helped us gather the pertinent data. We provided him with the demographic information of our target market. We gave him the age range, income range, net worth range, etc. of the market we target.
He pulled the state court records revealing the total number of divorces in the area we serve. He pulled census data so that he could figure out the income data. He did some research to figure out whether divorce rates are constant across income groups (apparently, they aren’t). He also found some other data that helped, but it wasn’t nearly as important as the basics. He did his statistics magic and figured out how many cases fall within our target market each year in each county we serve.
Then, of course, we could take the number of cases we have and compare it to the number of cases in the market and determine how much of our market we’re serving. We, of course (not being statistics people), had trouble with the idea that there are two clients per divorce, so we initially thought we had a huge portion of the market. He straightened us out, and we realized that we were at nearly 30% in one county and less in others. That helped us refocus our marketing in counties where we had a better chance to grow.
What Do You Do with the Answer?
Surprisingly, doing this research also helped us figure out that certain counties just aren’t worth the effort. One county in our area has a shockingly low number of divorces and a shockingly high number of marriage counselors (coincidence?). Part of our marketing strategy is building relationships with marriage counselors (a high-cost activity). Once we understood the revenue potential (or lack thereof), we redirected our efforts.
It’s not nearly as tough to figure out your market share as you might imagine. It’s a worthwhile exercise, and it’s a metric worth tracking over time. It can become a key indicator that helps you make management and resource allocation decisions that have a huge impact on your future growth.
