Fatal 2% Rule
What is the fatal 2% rule?
Definition of fatal 2% rule
The fatal 2% rule is a decision-making tool for strategic business planning. The ‘rule’ creates a benchmark for success or failure, stating that if a company can achieve just 2% of total market share for their venture, idea or product, then they will be successful.
The flip side is that failure to meet this 2% benchmark can, and likely will, be ‘fatal’ for the company.
Calculating whether a new company or venture will be able to achieve this benchmark 2% is therefore critical for business planning and initial strategy.
So how do you do it?
A SWOT analysis — looking at a business’s strengths, weaknesses, opportunities, and threats — is a great place to start.
How do you do a SWOT analysis?
The main aim of a SWOT analysis is to take a long, hard look at every aspect of a business, and work out where it excels, where it is weakest, what it can take advantage of and what risks or obstacles it might encounter.
A SWOT analysis is generally conducted by a team of people from across the organization, representing different views, perspectives, and insights from every corner of the company. Taking stock and identifying factors for all four of the SWOT categories, then bringing them together usually in a four-square analysis template listing everything in priority order for each category.
An important step during SWOT is to try and flip the weaknesses, threats, and obstacles and make them opportunities or strengths for the organization. For example, if you predict consumer demand to change direction in the coming months, what can you do to diversify your offer and meet new needs?
The ability to pivot and adapt to external and internal changes is not only a key part of an agile approach, but it will help you win — and retain — that much-needed 2% market share - the fatal 2% rule.
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