How to Write a Business Plan – Part 3 – The Market Analysis

How to Write a Business Plan – Part 3 – The Market Analysis

How To Write A Business Plan

The business plan boot camp will consist of nine parts in total, each tackling a portion of the plan and the basics of how to handle its successful creation as prospective businesses look to secure funding and backing. Put together, these skills will help create a business plan that will wow potential investors.

Part 3. The Market Analysis

The market analysis will be one of the more technical aspects of your business plan. Here you’ll include an overview of the business, the needs of your desired market, who exactly you’ll be marketing to, and what advantages you possess, as well as how you’ll mitigate any potential disadvantages.

The market analysis focuses on the industry that your business will be part of and your research into whether there is a true need in that market. In this section, it is acceptable, and expected, to use graphs and charts to demonstrate your points and show viability in your desired market.

As you write the business overview, expound upon the purpose of your business. Answer the questions that will be raised about what problems you’ll be the solution to and what specific needs are present in the market you hope to enter. Then demonstrate how your businesses’ products or services will meet those needs. Be specific. Generalities will make it seem like you have holes in your plan.

Address the competitive advantages your business has that you think will make your business succeed. Some of those factors could include something unique about your experience, such as your ability to close a deal, or your specific location in a certain part of a state struggling with an issue.

Industry Description & Outlook

In this section, you want to write about your industry overall. Include the current market share of your industry at a national level and in your area. Also include the growth rate of your industry over time as well as any other significant trends, such as the projected growth rate of your industry over the next five and 10 years.

Distinguishing Characteristics

In this section, you want to address and identify what the key needs of your target customers are. This is the key to every good business. If you are not solving a real and identifiable need, you don’t have a legitimate business idea and you won’t succeed. So spend some time in this section exploring what the real problem is that you’re solving?

Once you know the needs of your target audience, you should drill down in this section and explore the demographics of that audience. Who is going to buy your product (ages, races, life stages, etc.) Where are these potential customers located? Is there anything in the cycle of the year — such as a seasonal need — that would prohibit or increase purchasing by your potential customers? Answer all of these questions in this section.

Target Market

To demonstrate the viability of your business, you’ll want to narrow your target audience to a manageable group. Be able to answer a couple of important questions:

Who will you be targeting with your products and services?

Is there proof in your market that they are there?

You want to get narrow enough that you are giving your customer a one-to-one exchange, i.e. a product/service for a need. But you don’t want to narrow your target market too slimly that you miss out on customers that may be your second-tier group. So do your research and find out using data in your area who will want to purchase your services or products.

Use data to support customer activity in your area. This can be as simple as the annual amount of money your target market produces each year within your industry. In addition, include the market growth forecast for your target market. Know how much you project they will spend in the next year.

Again, be able to explain in detail where your numbers come from and why they make sense. This means exploring the percentage of the market share your business expects to take in your defined area and how many customers you expect to gain in that area. You’ll need to use data to calculate this projection and you’ll need to explain how you arrived at your number. Why are you convinced that you can enter this market and make a real impact on the market share?

Analysis of Your Competitors

You’ll want to be precise in this section, as you’re addressing the number of specific competitors that you can define in your area who might attract your potential customers. With the rise of e-commerce, it’s important to think about national competitors as well. You’ll want to define your competition by the service, product line, and market segment that each of your competitors occupies. Among the elements you’ll want to address in this section include:

  • Your competitor’s market share
  • The weaknesses and the strengths of your competitors
  • An analysis of the barriers that could stand in the way of you entering the market or being successful in it.
  • Define any secondary level competitors that may take away or hinder your target market
  • An analysis of how much interest/how important your defined target market is to your defined competitors
  • Your best estimate of when you should enter the market.
  • Define the obstacles you may encounter as you enter the market (capital to sustain the startup, lack of adequate employees, technology, etc.)

Barriers to Entry and Regulations

The last piece of the market analysis puzzle is to point out ways you may fail. Having a great product is not enough if someone else can enter the market and take half of your target market away. You should also be aware of any prohibitive costs in regard to overhead, marketing, and regulation. If you’re aware of the potential obstacles and have a real understanding of how to combat them successfully you’ll be doing the rest of your market analysis a favor and in the process might get closer to reaching that target market you’ve been researching.

About author

Michael Barry
Michael Barry 31 posts

Michael Barry is the Editor-In-Chief at AgeOfTheSmallBusiness.com. Currently living in Boston, Massachusetts, he received his B.A. in Financial Economics from St. Anselm College and his MFA in Creative Writing from the Stonecoast Program at the University of Southern Maine.

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