Blog · Wallet share and penetration
The share of wallet formula, the three ways to estimate the denominator when the customer will not tell you, a worked example from a real-shaped ledger, the roll-up from customer to segment to company, and the four mistakes that make the number wrong: mixing periods, counting one-off purchases, using a benchmark as the wallet, and reporting a share with no gap value beside it.
Share of wallet is the most useful number in B2B sales and the most often calculated wrongly, because the denominator has to be estimated and the estimate is usually not written down. This guide gives the formula, the three ways to estimate the wallet, a worked example, the roll-up, and the mistakes.
Share of wallet = your sales to the customer ÷ the customer's total category spend, same period
Numerator: your ledger, per customer, per category, per period. Denominator: the wallet, estimated.
Gap = wallet − your sales
The gap is what to report beside the share. A 30 percent share of a $10,000 wallet and a 30 percent share of a $2m wallet are not the same finding.
| Method | Source | Quality | When |
|---|---|---|---|
| The customer tells you | Tender, account review, contract | High, dated | Whenever you can get it |
| Norm from your own base | Median spend per unit of size among customers where you are the main supplier | Medium, consistent | The default |
| Public figure scaled | Industry spend per employee or per site, times the customer's size | Low, labelled | Fallback |
The norm method uses your own customers as the reference. Among customers of a given size and sector where you hold most of the business, the median spend per employee, per site, per bed or per store is the norm. Multiply by the target customer's size and that is the wallet estimate.
A distributor of packaging to food manufacturers. Category: corrugated. Period: last twelve months.
| Customer | Sites | Your sales | Wallet method | Wallet | Share | Gap |
|---|---|---|---|---|---|---|
| 2207 | 4 | $310,000 | Customer stated | $380,000 | 82% | $70,000 |
| 4471 | 6 | $140,000 | Norm: $95,000 per site | $570,000 | 25% | $430,000 |
| 9034 | 2 | $160,000 | Norm | $190,000 | 84% | $30,000 |
| 1187 | 9 | $90,000 | Norm | $855,000 | 11% | $765,000 |
The norm of $95,000 per site came from the eleven customers in the base where the distributor supplies nearly everything, and it is on the report. Customer 1187 is the finding: nine sites, an 11 percent share, three quarters of a million dollars going elsewhere. Customer 2207 is fine, and the share says so with a stated wallet behind it.
Share of wallet per customer rolls up to a segment and to the company, weighted by wallet:
Segment share = Σ your sales ÷ Σ wallets
Not the average of the customer shares, which weights a two-site customer the same as a nine-site one. And the identity:
Σ your sales across customers = invoiced revenue in the category
If it does not, a customer is missing or double-counted, and the shares are wrong before the wallets are.
Periods mixed. Your sales for twelve months against a wallet the customer quoted for a calendar year that ended three months earlier. Same period, both sides.
One-off purchases counted. A single large order inflates a share that will fall next year. Use a trailing period long enough to smooth it, and show the trend.
A benchmark used as the wallet. An industry figure of spend per employee describes an average company, not this one. Use it only as the fallback, labelled.
Share with no gap. A percentage alone cannot be ranked by value. Report the gap.
Share above 100 percent. The wallet is wrong. List these; they are where the norm needs revisiting.
Mapped once, the ledger and the customer master produce the norms, the wallets, the shares and the gaps per customer every month, with the method on each line. Covirage builds this from the export as it is. The share of wallet term has the short definition, and the gap valuation guide covers how to put a value on what the share leaves out.
Market share is your sales over the whole market's sales. Share of wallet is your sales to one customer over that customer's total category spend. Market share is one number for the company; share of wallet is one number per customer, and it rolls up.
Estimate it from your own base: the median spend per unit of size among similar customers where you are the main supplier. Label the estimate as an estimate, state the method, and keep it the same for every customer.
Whichever the category is bought in. Where prices vary a lot between suppliers, volume is fairer. Where the product is a service, revenue. State which, and never mix.