The Market Analysis provides the reader with an understanding of how well the business knows and understands its market and if it is big enough to support the business objectives. This section provides an overview of the industry that the business will participate in. As this section is narrowed down to the ideal customer based on the business strategy, the plan will define the target market. A detailed description and sizing of the target market will help the reader understand the market value the business is pursuing (the number of potential customers multiplied by the average revenue for the product or service).
In defining the target market, the plan will identify key elements such as geographic location, demographics, buyer characteristics, the target market's needs, and how market needs are currently being met. If there are any direct competitors, explain how the company’s service compares to the competitors in terms of solving the consumers’ problems.
This section may also include a Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis as necessary, to better assess the business’ position against the competition.
Depending on the type of business, the following sections may or may not be necessary. Only include what is need and remove everything else.
Industry type:
Begin with the broader descriptions of the market opportunity. For instance, if the intended business is a travel agency, the industry type would be a service industry. In this particular market, global revenues are projected to exceed $183 billion, but the local agency will have a much smaller market. Identify the potential clientele in the company’s local geography that might fit into the target demographic group. This section will also identify any industry regulations and evaluate trends in market growth and stability.
Market segmentation:
This section defines the main market segments and those the business is targeting now. A market segment is a group of people (or other businesses) within the industry, identify smaller segments, such as luxury travel or exotic cruisers. The market can also be segmented by criteria such as quality, price, range of products, geography, demographics, and others. A few other elements to consider answer questions such as: Is the segment growing, shrinking, or will it be flat for the next few years? What percentage of the market will be reachable? What share of the market is anticipated within the next 2-3 years? Graphics are best used in a section like this to either show growth (line graph) or percentages of markets or groups (pie chart).
Competition:
All businesses compete in one way or another. It may be with specific, direct competitors or it may be with the way customers have been doing things for a long time. When identifying the competition, identify who else is providing services to solve the same problem the business seeks to address. What are the business’ advantages over these competitors? How will the company’s voice be heard over the noise of competitors? Sometimes a business plan includes a matrix of features and compares how each business offers or does not offer those features. This section reflects how the company’s solution is different and better suited for the identified target market compared to the competition.
SWOT analysis:
A SWOT analysis may be included by completing the boxes below to assess the business’ current environment’s strengths and weaknesses (internal) and opportunities and threats (external). This is a good exercise to go through on an annual basis. After completing the analysis, provide thoughts on: how the business’ strengths can help maximize opportunities and minimize threats; how its weaknesses can slow the company’s ability to capitalize on the opportunities; and how the business’ weaknesses could expose it to threats.
