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What is the Fatal 2% Rule
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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.

General FAQ

What is the 2% rule in real estate?
The 2% rule in real estate dictates that a rental property serves as a good investment if its monthly income matches or exceeds 2% of the overall investment. For example, a $100,000 property would need to generate a rental income of at least $2,000 to meet this criterion.
What does a pivot mean in business?
In the business world, a pivot refers to a significant change in a product or operations to solve a problem. For example, a company may come to realize that its core product is failing to stimulate the expected level of interest in the target audience and aim for a different demographic instead. Alternatively, it might rework the product or spin it off into a new concept. Different technologies may be used to manufacture products, too, to reduce costs and/ or improve quality.
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