Market Analysis
In the Market Analysis section of your
business plan, your goal is to demonstrate how your business
will generate sales and succeed given market conditions. Here, you really have to show your reader that you''ve done your homework.
A Potential Investor Wants to Know What are the advantages of your product or service?
What customers will you sell it to? (What’s your target market ?)
What do those customers care about?
How can you reach those customers and convince them to buy your product or service?
Why will they choose you over your competition?
How much money will these customers spend on your product or service?
Keep in mind that market analyses are often overly optimistic. Your goal is to convince your potential investor that you''re being realistic and that you can back up your claims with actual research and a sound analysis of the marketplace. If there''s not a market for your product or service, nothing will make your company successful.
An Investor''s Perspective
"Convince me that your product or service has enormous market potential —and make sure you have evidence to support that."
What the Market Analysis Should Include
A Market Analysis should include a discussion of your:
Market opportunity. Your market opportunity is a quantification of the number of potential customers and the amount that they are willing to spend. This information shows a potential investor that the revenue estimates for your
business are realistic and substantiated. Be sure to consider any observable market trends in your analysis and projections.
Competition. A potential investor tries to ascertain if you have identified all direct and indirect competitors. Have you presented a convincing description of how you will differentiate your product or service from competitor''s offerings? Here, you should also present information on any government regulations or outside influences that help shape the competitive landscape.
Marketing strategy. How will the business make sure customers know about this product or service and come to prefer it to similar products or services offered by competitors? Your Market Analysis should include a brief discussion of how your company will use distribution, advertising, promotion, pricing, and selling incentives. Explain to your reader how you will sell your product to a single customer. Note: You will elaborate on the Marketing Strategy in another section of the business plan. Your description of the strategy in this section should serve as a summary, rather than step-by-step map of the process
Market research. Don''t ask your reader to "trust you" on your analysis of the market. Substantiate your claims with some type of market research. Different types of research have varying degrees of credibility. Supporting research in this section might include, depending on the nature of your business:
Research you''ve done yourself (surveys, polls)
Existing industry research
Research you pay someone to do on your behalf
Financial forecasts. Other sections of your business plan will present more detail about your financial forecasts, but the market analysis should include your projected sales growth, market share, and amount of sales (by customer)—and details that can support your projections.
An Investor''s Perspective
"Please don''t tell me that you just need to get 1% of an enormous market. I need to understand why each and every expected customer will choose your product or service. Tell me how a real person in your target market will be convinced to buy this product."