A market is the total sum of prospective buyers, individuals, or organizations that are willing and able to purchase a business’s potential offering. A market analysis is a detailed assessment of the market you intend to enter. It provides insight into the size and value of the market, potential customer segments, and their buying patterns.
In this section, we’ll be covering what information to include in your business plan after completing your research. If you’re struggling with the research itself, you should check out our market research resources for step-by-step guidance.
The information featured in your market analysis should focus on firmly defining who your customers are. Here are the two steps you need to take:
Finding your target market requires segmentation based on demographic and psychographic information until you reach the ideal customer. You need to address who they are and how you identified them.
A target market analysis is a key part of any business plan. Let’s walk you through some examples.
Identifying your potential customers isn’t enough. You also need to prove that the size of the market can support your business. To do this, it’s helpful to define what’s available, serviceable, and can be obtained.
The main purpose of the market analysis is to show who your customers are. While defining your target market may be enough, it can be helpful to include some of the following supporting details.
Before starting a business, you should know the state of your industry and where it’s headed. This includes industry metrics you’ve collected, any barriers to entry, emerging trends, or common success factors.
Conducting a customer analysis provides additional depth to your target audience. You’ll know them better and go beyond just segmentation.
It can be difficult for you, your employees, and potential investors to visualize who your customers are based solely on data. Creating a customer persona can bring them to life and support your target market choice.
Conducting any sort of in-depth research can be a time-intensive process. However, the benefits far outweigh the investment—so much so that it’s recommended that you revisit your market analysis at least once a year in order to stay on top of emerging trends or changes in the market.
As part of your business plan, it demonstrates that you have a firm understanding of your customers. Here are the other benefits gained by completing a market analysis:
If you really understand your potential customers and market conditions, you’ll have a better chance of developing a viable product or service. It also helps you explore if your idea will work or not. If you determine that the market size can’t sustain your business, there are too many barriers, high starting costs, intense competition, or some other factor that would lead to a higher chance of failure—you can pivot and avoid wasting your hard-earned time and money.
Researching the market landscape will help you strategically position your business. This may be done through pricing, specific features, production/distribution, or any other method to differentiate your business and make it more attractive to your target audience.
