How to Write a Business Plan: Market Analysis
The Business Plan and the Importance of Defining Your Target Market
Even if you intend on selling a product service only within your own community, you won't be selling that service to everyone who lives there. Knowing exactly what type(s) of people might be interested in buying your product or service and how many of them reside in your projected area or region is fundamental date forming the foundation of your target market information for your Market Analysis.
Once target market data has been established, projections in terms of volume of product or service might be purchased in given blocks of time, as well as how prospective sales might be affected by trends and policies, will further inform analysis data.
How to Write a Business Plan: The Market Analysis
Solid research is key and cornerstone to any solid business plan. Use these general terms as linchpins in research data for the Market Analysis section of your business plan, and to identify your target market:
|Age||What age range am I catering my products/services to? Kids? Adults? Seniors? Gen X? Millennials?|
|Gender||Am I targeting men, women, or both sexes?|
|Marital Status||Are my target customers married or single?|
|Family||What is their family structure (number of children, extended family, etc.)?|
|Location||Where do they live? Am I looking to sell locally? Regionally, Nationally?|
|Education||How well are they educated?|
|Income||What is their income?|
|Occupation||What do they do for a living?|
|Religion||Are they members of a particular religious group?|
|Language||Are they members of a particular language group?|
|Lifestyle||What is their lifestyle like?|
|Motivation||What motivates them?|
|Size||What is the size of the target market?|
But don't stop here. To succinctly define your target market, through polling or survey, ask members of your target market specific questions directly related to your products or services. For instance, if you plan to sell computer-related services, ask questions relating to the number of computing devices your prospective customers own. If you plan on selling garden furniture and accessories, ask what kinds of garden furniture or accessories your potential customers have bought in the past, how often; and what they have considered buying or expect to buy within the next year, three years, five years.
Projections Factors to Consider in Polling & Reporting On Your Target Market
- What proportion of your target market has used a product similar to yours before?
- How much of your product or service might your target market buy? (Estimate this in gross sales and/or in units of product/service sold.)
- What proportion of your target market might be repeat customers?
- How might your target market be affected by demographic shifts?
- How might your target market be affected by economic events (e.g. a local mill closing or a big-box retailer opening locally)?
- How might your target market be affected by larger socioeconomic trends?
- How might your target market be affected by government policies (e.g. new bylaws or changes in taxes)?
Writing the Market Analysis Section of the Business Plan
Once adequately armed with this information, you'll write the Market Analysis in the form of several short paragraphs using appropriate headings for each. If you have several target markets, you may want to number each.
Remember to properly cite your sources of information within the body of your Market Analysis as you write it. You and other readers of your business plan will need to know the sources of the statistics or opinions that you've gathered from others.
Online Tools for Market Research
- Keyword searches can give you an overall sense of potential demand for your product or service based on the number of searches.
- Google Trends analysis can tell you how the number of searches has changed over time.
- Social media campaigns can give you an indication of the potential customer interest in your business idea.
Online Market Research Sources in the U.S.
- The U.S. Small Business Administration (SBA) Business Data and Statistics and small business research from the SBA Office of Advocacy.
- The U.S. Census Bureau (www.census.gov) maintains a huge database of demographic information which is searchable by state, county, city/town, or zip code using the American FactFinder tool. Community, housing, economic, and population surveys are also available.
- The U.S. Department of Commerce Bureau of Economic Analysis (BEA) has extensive statistics on the economy including consumer income/spending/consumption, business activity, GDP, etc., all of which is searchable by location.
Online Market Research Sources in Canada
- The Government of Canada's Canada Business Network website is an excellent place to start your research on your target market.
- Statistics Canada is an excellent resource for demographic and economic data.
- The Business Development Bank of Canada (BDC) provides market research and consulting with industry experts.
- The Government of Canada's Canada Business Network provides business information to entrepreneurs by province/territory, including market research.
Some provinces and territories maintain up-to-date websites with official statistics and publications:
- Alberta Community Profiles: Profiles of Alberta communities including demographics and other statistics.
- Economic Development Winnipeg Inc: Industry profiles and market research for Winnipeg.
- Yukon Business and Economic Research Branch: Research and reports.
- Northwest Territories Bureau of Statistics: Research and statistics on the Northwest Territories.
- Institut de la statistique du Québec: Statistics and publications on the economy, culture, etc.
- Databank of official statistics on Quebec: Statistics compiled by Quebec departments and agencies.
- British Columbia Small Business Profile: Information and resources for BC's small business market.
- British Columbia's Key Indicators: Statistics for BC's economy, including labour, housing stats, price indexes, retail/wholesale sales, tourism, etc.
- Statistical Information for Newfoundland & Labrador: Provincial demographic and statistical information on population, income, and industry.
- Economic Research and Analysis Division: Research and economic forecast statistics.
Local Sources of Market Research
There are also a great many local resources for building target market information that you'll want to explore, including:
- Local library
- Local Chamber of Commerce
- Board of Trade
- City Hall
- Economic Development Centre
- Local government agent's office
- Provincial business ministry
- Local phone book, yellow pages (printed or online)
All of these will have information helpful in defining your target market and providing insights into trends.
Doing Your Own Market Research
These are all secondary sources of information (others have conducted the research and compiled the information), You may also want to conduct your own market research (use primary data). For instance, you might want to design a questionnaire and survey your target market to learn more about their habits and preferences relating to your product or service. Do-It-Yourself Market Research gives a more comprehensive explanation of the basics of market research as well as providing tips for sampling and accessing your target market.
Market research is time-consuming but is an important step in affording your business plan validity. If you don't have the time or the research skills to thoroughly define your target market yourself, hiring a person or firm to do the market research for you can be a wise investment.