The market analysis section of your business plan is where you discuss the size of the market in which you’re competing and market trends that might affect your future potential such as economic, political, social and/or technological shifts.
This helps you and readers understand if your market is big enough to support your business’ growth, and whether future conditions will help or hurt your business. For example, stating that your market size is $56 billion, has been growing by 10% for the last 10 years, and that trends are expected to further increase the market size bodes well for your company’s success.
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You’ll want to address these issues in your market analysis:
Learn how to write the full market analysis below.
Here’s how to write the market analysis section of a business plan.
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In your industry overview, you will define the market in which you are competing (e.g., restaurant, medical devices, etc.).
You will then detail the sub-segment or niche of that market if applicable (e.g., within restaurants there are fast food restaurants, fine dining, etc.).
Next, you will describe the key characteristics of your industry. For example, discuss how big the market is in terms of units and revenues. Let the reader know if the market is growing or declining (and at what rate), and what key industry trends are facing your market.
Use third-party market research as much as possible to validate the discussion of your industry.
Here is a list of additional items you may analyze for a complete industry overview:
For each of these items, you want to provide some detail about them including their current state as well as what external factors have played a role in the recent past. You can also include many other important factors if they apply to your business including demographic trends, legal issues, environmental concerns, and sustainability issues.
When you are done analyzing all of these factors, wrap it up by summing them up in a statement that includes your view on the future of the industry. This should be positive to attract investors, potential customers, and partners.
If you’re having trouble thinking about all of these factors then it might be helpful to first develop a SWOT analysis for your business.
Once you have an understanding of the market, you’ll need to think about how you will position yourself within that potential market.
You want to think about how large your market is for this venture. You also want to consider whether you’d like to pick a niche within the overall industry or launch yourself into the mainstream.
If you have an innovative product it can be easier to enter the mainstream market – but at the same time, you might face some additional competition if there are similar products available.
You can choose to specialize in a niche market where you’ll face less competition – but might be able to sell your services at a higher price point (this could make it easier for you to get potential customers).
Of course, if your product or service is unique then there should be no competition. But, what happens if it isn’t unique? Will you be able to differentiate yourself enough to create a competitive advantage or edge?
If you are planning on entering the mainstream market, think about whether there are different sub-niches within your specific market. For example, within the technology industry, you can choose to specialize in laptops or smartphones or tablets, or other categories. While it will be more difficult to be unique in a mainstream market, you will still be able to focus on one type or category of products.
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Many companies are able to stand out – whether by offering a product that is unique or by marketing their products in a way that consumers notice. For example, Steve Jobs was able to take a business idea like the iPhone and make it into something that people talked about (while competitors struggled to play catch up).
You want your venture to stand out – whether with an innovative product or service or through marketing strategies. This might include a unique brand, name, or logo. It might also include packaging that stands out from competitors.
Write down how you will achieve this goal of standing out in the marketplace. If it’s a product, then what features do you have that other products don’t? If it’s a service, then what is it about this service that will make people want to use your company rather than your competition?
You also need to think about marketing. How are you going to promote yourself or sell your product or service? You’ll need a marketing plan for this – which might include writing copy, creating an advertisement, setting up a website, and several other activities. This should include a description of each of these strategies.
If you’re struggling with the details of any of these sections, it might be helpful to research what other companies in your market are doing and how they’ve been successful. You can use this business information to inform your own strategies and plans.
In the second stage of your analysis, you must determine the size and competition in your specific market.
Your company’s relevant market size is the amount of money it could make each year if it owned a complete market share.
To begin, estimate how many consumers you expect to be interested in purchasing your products or services each year.
To generate a more precise estimate, enter the monetary amount these potential customers may be ready to spend on your goods or services each year.
The size of your market is the product of these two figures. Calculate this market value here so that your readers can see how big your market opportunity is (particularly if you are seeking debt or equity funding).
You’ll also want to include an analysis of your market conditions. Is this a growing or declining market? How fast is it growing (or declining)? What are the general trends in the market? How has your market shifted over time?
Include all of this information in your own business plan to give your readers a clear understanding of the market landscape you’re competing in.
Next, you’ll need to create a comprehensive list of the competitors in your market. This competitive analysis includes:
To show how large each competitor is, you can use metrics such as revenue, employees, number of locations, etc. If you have limited information about the company on hand then you may want to do some additional research or contact them directly for more information. You should also include their website so readers can learn more if they desire (along with social media profiles).
Once you complete this list, take a step back and try to determine how much market share each competitor has. You can use different methods to do this such as market research, surveys, or conduct focus groups or interviews with target customers.
You should also take into account the barriers to entry that exist in your market. What would it take for a new company to enter the market and start competing with you? This could be anything from capital requirements to licensing and permits.
When you have all of this information, you’ll want to create a table like the one below:
Competitor A
Competitor C
Once you have this data, you can start developing strategies to compete with the other companies which will be used again later to help you develop your marketing strategy and plan.
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Now that you understand the different components of the market analysis, let’s take a look at how you should structure this section in your business plan.
Your market analysis should be divided into two sections: the industry overview and market size & competition.
Each section should include detailed information about the topic and supporting evidence to back up your claims.
You’ll also want to make sure that all of your data is up-to-date. Be sure to include the date of the analysis in your business plan so readers know when it was conducted and if there have been any major changes since then.
In addition, you should also provide a short summary of what this section covers at the beginning of each paragraph or page. You can do this by using a title such as “Industry Overview” or another descriptive phrase that is easy to follow.
As with all sections in a business plan, make sure your market analysis is concise and includes only the most relevant information to keep your audience engaged until they reach your conclusion.
A strong market analysis can give your company a competitive edge over other businesses in its industry, which is why it’s essential to include this section in your business plan. By providing detailed information about the market you’re competing in, you can show your readers that you understand the industry and know how to capitalize on current and future trends.
The following are examples of how to write the market analysis section of a business plan:
According to the Sunglass Association of America, the retail sales volume of Plano (non-prescription) sunglasses, clip-on sunglasses, and children’s sunglasses (hereinafter collectively referred to as “Sunwear”) totaled $2.9 billion last year. Premium-priced sunglasses are driving the Plano Sunwear market. Plano sunglasses priced at $100 or more accounted for more than 49% of all Sunwear sales among independent retail locations last year.
The Sunglass Association of America has projected that the dollar volume for retail sales of Plano Sunwear will grow 1.7% next year. Plano sunglass vendors are also bullish about sales in this year and beyond as a result of the growth of technology, particularly the growth of laser surgery and e-commerce.
According to the Nebraska Restaurant Association, last year total restaurant sales in Nebraska grew by 4.3%, reaching a record high of $2.8 billion. Sales at full-service restaurants were particularly strong, growing 7% over 2012 figures. This steady increase is being driven by population growth throughout the state. The Average Annual Growth Rate (AGR) since 2009 is 2.89%.
This fast growth has also encouraged the opening of new restaurants, with 3,035 operating statewide as of this year. The restaurant industry employs more than 41,000 workers in Nebraska and contributes nearly $3 billion to the state economy every year.
Nebraska’s population continues to increase – reaching 1.9 million in 2012, a 1.5% growth rate. In addition to population, the state has experienced record low unemployment every year since 2009 – with an average of 4.7% in 2013 and 2014.
American Insurance Company (AIC) offers high-quality insurance at low prices through its chain of retail outlets in the state of Maine. Since its inception, AIC has created an extensive network of agents and brokers across the country with expanding online, call center and retail business operations.
AIC is entering a market that will more than double in size over the next 50 years according to some industry forecasts. The insurance industry is enjoying low inflation rates, steady income growth, and improving standards of living for most Americans during what has been a difficult period for much of American business. This makes this a good time to enter the insurance industry as it enjoys higher margins because customers are purchasing more coverage due to increased costs from medical care and higher liability claims.
American Insurance Company provides affordable homeowners, auto, and business insurance through high-quality fulfillment centers across America that have earned a reputation for top-notch customer service.
AIC will face significant competition from both direct and indirect competitors. The indirect competition will come from a variety of businesses, including banks, other insurance companies, and online retailers. The direct competition will come from other well-funded start-ups as well as incumbents in the industry. AIC’s competitive advantages include its low prices, high quality, and excellent customer service.
AIC plans to grow at a rate that is above average for the industry as a whole. The company has identified a market that is expected to grow by more than 100% in the next decade. This growth is due to several factors: the increase in the number of two-income households, the aging population, and the impending retirement of many baby boomers will lead to an increase in the number of people who are purchasing insurance.
AIC projects revenues of $20M in year one, which is equivalent to 100% growth over the previous year. AIC forecasts revenue growth of 40%-60% each year on average for 10 years. After that, revenue growth is expected to slow down significantly due to market saturation.
The following table illustrates these projections: