Market Analysis Provides Key Components of Business Plan

Before getting too far down the road with your business planning process, you will need to complete a thorough market analysis based on the research you did in deciding to launch your business.

Your market analysis not only provides an overview of your industry, but also the conclusions you were able to draw from your market research findings. While there is no absolute method for including a market analysis, under most circumstances you are going to want to include most or all of the following points as you create this valuable section of your plan:

1. Industry description and outlook. Regardless of how you decide to proceed with your market analysis, you will almost certainly want to start this section of your business plan with a description of your company’s industry. Research your industry’s growth and note its current scope. Then, discuss some of the business characteristics of your industry, such as its projected growth rate. Include the major customer segments.

2. Introduce your target market. Once you have described the overall industry and marketplace, next indicate how you have narrowed down your target market to a workable size. One of the biggest errors new business owners make is in keeping their target market too broad, which leaves them in the impossible position of trying to meet the needs of too many diverse customer groups. This obviously runs the risk of stretching limited resources too thin.

3. Distinguish target customer characteristics. Next, describe the critical needs of your targeted customer base and to what extent–and by whom–these needs are currently being met. This is also the place to detail the demographics of your customer group. If there are cyclical purchasing trends, including seasonal buying, this is the place to note them as well.

4. Target market size and growth. You will also want to include additional details about the size of your targeted market. Conduct sufficient research to provide data on total annual purchases within your targeted marketplace. In addition, do sufficient research to create a reasonable forecast of market growth.

5. Market share percentage. Once you have described the size and potential growth for your targeted market, next identify the market share percentage and number of customers you believe you will be able to gain within a defined demographic area. Include justification for the numbers you come up with.

6. Pricing and gross margin targets. Explain your pricing strategy, gross margin levels and any special pricing schemes you plan to use, such as discounts.

7. Competitive analysis. Finally, identify your competitors and their targeted markets. Also, make note of any indirect or secondary competitors impacting your target markets. Include information on their current marketshare as well as what you perceive as their strengths and weaknesses.

8.  Barriers and regulatory restrictions. Discuss any barriers to entering the market that you have identified. These might include technology changes, unusually high investment costs, lack of qualified personnel, and other hurdles. In some cases, there may be regulatory restrictions impacting your business. In that case, describe how you plan to comply with these regulations.

Your market analysis forms a key part of your business plan. Interpreting your market research results in a clear and concise manner will provide a strong foundation for your overall plan.

Jeff Gonzales
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