Market Analysis: Business Plan Basics

Market Analysis

In order to create an effective market analysis section for a business plan, it is important to demonstrate market and industry expertise. Investors and financiers crave confidence and your plan must deliver. Be detailed and write honestly.

The market analysis section of a business plan is comprised of applied analysis and conclusions concerning current and projected positions in the marketplace. For organizational purposes, the market analysis follows the company description section.

market analysis

What to Include in A Market Analysis

  • Industry Description and Outlook – Provide a detailed description of your industry, ensuring to note its current size, historic growth rate and expected growth. Identify trends and unique characteristics such as life-cycle stages and the frequency of new product introductions. Once this is laid out, indicate the more significant customer groups the market targets.
  • Information About Your Target Market – A niche business works best within a manageable profile. To engage your investors, demonstrate your mastery in a specific geographic area. For example, a Mom and Pop pretzel factory seeking start-up cash is not going to present a market analysis covering the entire country. Instead, it will focus on a more manageable market such as regional distribution. Unfortunately, too many businesses make the critical error of trying to bite off more than they can chew. This manifests through projecting all of the markets they can think of. This is not the approach your market analysis should take. Instead, perform a thorough research of your industry and area, including specifics that provide a clear picture of the business landscape. From that, choose only the strongest markets to keep your plan razor sharp.
  • Distinguishing characteristics – Here you will describe the fundamental needs being met by your company. For example, identify your customer’s needs. Be specific. Are those needs currently being met by existing players in the market? How will you satisfy them better? Illustrate the demographics of the market group and identify where they are located. As for your product or service, is there a seasonal component? Have you identified other factors that determine a cyclical business trend that impacts your business? These are the fine details that really make a business plan shine.

market analysis

further market analysis information

  • Size of the primary target market – In this section, identify the annual volume of your market using the existing business models of your competitors. To do so, research purchases made by your customer group from other sources during this period. This projects what the customers will spend in the future, ideally replacing competitor products and services with your own. Forecasts can be arbitrary so be cautious of overt optimism.
  • Your slice of market share – In this section, educate investors on the market break down. Share your projections of your expected percentage of the industry. Also, outline the number of new customers expected in your area. Don’t make up a number, but base it on logical speculation, pre-orders, advertising feedback and focus groups. Be straight forward with your calculations.
  • Pricing and gross margin targets – Use your geographic region as an indicator to illustrate your pricing structure and how it factors into your profit projections. You will want to define gross margin levels as well as any discount plans you will use to achieve numbers.
  • Research & Development – What’s new and what’s improved? When you detail your research and development activities in relation to market tests or studies, be sure to only illustrate the results of these tests. The results are important here, not the collection process. The specific details of any such studies should be outlined in the appendix of your business plan.
  • Regulatory Restrictions –  Be upfront with potential investors. It is always the best course of action. For their consideration, you should therefore include customer and government regulatory requirements that will affect your business. You should also include how you will comply with such regulations and concerns. This section also incorporates projections of operational costs related to compliance of such regulations.

market analysis

finish with a competitive Market analysis

The competitive market analysis is a sub-section of your market analysis. It identifies competitors by service or product as well as market area. Be as detailed as possible when illustrating the following considerations, as doing so paints a specific picture of the business environment and helps your investors see the big picture:

  • What is your timeline to enter the market?
  • Strengths and weaknesses of competition
  • How important is your target market to competitors?
  • Are there any competition-based barriers that may hinder you as you enter the market?
  • Current and historical market share
  • What indirect competitors will impact your success?
  • What unique barriers exist in the market, such as changing technology, high investment cost, or lack of quality personnel?

market analysis

plan ON YOUR MARKET ANALYSIS to succeed

Once you have completed the market analysis section of your business plan, you can move on to the Organization and Management section. Consider hiring a professional to review your market analysis for omissions and errors. At this stage, a small investment in organization and presentation goes a long way. If you need assistance, contact Spotlight Publicity for a free consultation.

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