When you are writing your business plan for a startup or an established business, you need to be clear about your audience. Who are you selling it to? Who are your ideal customers? You need to take a look at everything from the demographics to the psycho-graphics and even the special characteristics, if any, of the audience in question.
When done right, the market analysis section of your business plan can help to establish the commercial viability of your business. Unless you know the market, you will never know if your product or services will sell.
Naturally, every business plan comes with a detailed section for market analysis. The section takes a look at the industry, the present market, and the nature of the customers.
Need help strengthening the “About the Market” section of your business plan? Read on!
Caution: This post is composed for the readers who are trying to their own business plans. A professional business plan writer has his/her own approach to write the market section since every business has its unique characteristics.
Read: What should be included in a business plan: Essentials of a Business Plan.
Elements of the Market Analysis Section
You must have seen that lot of business plan templates available online or through software programs have placeholders under this head. Generally, the market analysis will assess three major aspects-
- The industry
- Target market
1. Industry Analysis
The industry analysis gives an overview of the industry you are in. It presents the general trends and statistics to give an idea about the size of the industry. For example, you can include total sales or total revenues of your industry. You can also look at things like recent growth rates, historical and current trends, and so on.
A part of industry analysis is dedicated to external factors influencing the industry- things like laws, political environment, technology, and economy. Do not confuse it with other elements of the business plan.
2. Target Market Analysis
Knowing your customers is vital to selling your product or service. You need to know how many customers are willing to buy your product at your offered price. The more you know your customers, the better you will be to sell your offerings.
Entrepreneurs collect a range of information about the target market. These include demographic data like age, gender, education, and income. Additionally, businesses also look into customer habits and preferences, including lifestyle, hobbies, and political beliefs.
You may also want to take a look at factors like psycho-graphics, which talks about the attitude and taste of a particular segment in your audience. For instance, if you have an eCommerce store, you might want to know where your ideal customers normally shop, what their interests are, and how much money they have to spend.
Depending on your business model, you may also need to focus on a niche audience. These are small segments of your overall market and can help you achieve a market leadership position faster. For instance, you may have something to offer in particular to home offices, a trend on the rise right now.
An often ignored set of matrices for market analysis is TAM, SAM and SOM, read about them here.
3. Competitor Analysis
This section analyzes your direct competition. You will analyze the businesses that directly give you competition for sales. Depending on your business model, competitors can be local or global.
Think about what people look for when they want to get something you have to offer. What search results and brands do they have access to when they search now? What can you offer to make them change their mind?
Strong competitor analysis helps you understand where your business stands. You need to check your competitor’s approach to marketing, their strategies, and their overall financial health.
Tips to Strengthen the Market Section in Your Business Plan
1. Include Trusted Information
Whether you use Google or market research papers, make sure the information is reliable. Include as much factual information as you can in terms of numbers and metrics. You can use data from-
- Trade associations
- Databases in industry publications
- Government research
- Data from research firms
Market research is a key area of business plan writing. It should be done thoroughly and if needed you should seek professional help.
2. Consider Visual Elements
Visuals always make information easy to digest. Instead of reading a paragraph with statistics, it’s much better to use graphs and info-graphics to attract attention.
You can use graphs with permission from the author. Else, you can also use online tools to make your own infographics and charts. If you are good with Microsoft excel and word, you can have a whole range of options available to you. We have seen that presentation plays a great role to influence readers especially if you are going to use your business plan for banks, investors or other third parties. Though business plan writing follows the same process for all regions and countries, there are certain norms that are region-specific.
3. Think Like the Customer
You have to think for the customer’s perspective to form an idea of your target market. This technique can help you learn about your customers even when you lack statistical information.
Thinking from a customer’s perspective can even help you create buyer personas, a critical success factor.
4. Use Customer Surveys
It’s not always easy to find readily available information about your market and target audience. Maybe you are selling a new concept, or your offering is too niche.
In such cases, customer surveys can do the trick. Surely it’s an investment, but can help you discover key customer trends and preferences. You can ask anything you like to form insights about your market or competitors.
5. Be Relevant to your Business Concept
You might be tempted to use any impressive number you find. However, that’s not the best way to go! Think about the lead time you will have – or the amount of time you will need to fulfill an order. You need to be relevant to your competition.
Similarly, you need to carry out an initial investigation into the market, which you need to write in the market analysis section. More importantly, all the analyses that you carry out need to be applied to your business model.
Anything you include in your market section should be completely relevant to your business. For instance, let’s say you want to sell sports shoes. Now, quoting the market value of the whole footwear industry is not relevant for your business.
Rather, you should look for numbers specifically relating to your niche, i.e., sportswear.
The market analysis of your business plan is what attracts funds. The section provides proof of why your business will succeed and presents vital stats. Give extra importance to the market analysis, and take professional guidance if required.
Maroof HS CPA Professional Corporation is a professional accounting firm located in the Greater Toronto Area in Ontario. If you are looking for a professional business plan writing services in Toronto or in Canada, we can help you. Get in touch with us!