Sound Market Analysis is key to a sound Business Plan

The Market Analysis section of a business plan is very difficult to prepare especially for start-ups or established businesses diversifying in new (to them) markets. These difficulties will be compounded, due to an absence of any reliable data or evidence of likely demand, for businesses entering completely new markets or launching radically new offerings. Nonetheless, this section is critical as it underpins the business plan and demonstrates that the promoters have done their homework and know their marketplaces (at least as well as the incumbent players or other new entrants). If this section is unclear, vague or superficial, it begs the question as to whether there might be any real, sustainable demand for the proposed offerings.

Use this section to profile target markets based on market sizes, segments, trends, competition and user/customer profiles. Allow about three-six pages for this most important part of your plan. In most cases, it is very desirable that all detailed market research (field and/or desk) and analysis be completed before this section is written. If research reports or detailed findings are available, refer to their detailed findings in appendices or include them as annexes to the plan.

You will need to analyze the market in fair detail to dig down to your actual target market segments which you can then explore in depth. You will also need to consider competition, customer/user categories and so on. Create simple tables to show how market sizes, segments and shares are likely to move in the future after your entry/growth.

Avoid at all costs generalized statements like "we aim to achieve xx% of the xx market within three years". Instead, build up your projections from sound analysis/research and detailed assumptions (number of outlets, customers, consumption and so on) based on clear marketing and sales plans.

For more information and insights, see Profiles of Target Markets and Marketing Strategies, Sales Plans & Projections within our detailed Business Plan Guide.