How to Write the Market Analysis Section of Your Home Business Plan

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The Market Analysis section of your small business plan includes a description of your market, your niche, and the demand for your product or service. The Market Analysis section also needs to include the percentage of market share you envision and why.

To write this section of your business plan, you'll need to research and gather data about your market.

What to Focus on in this Section of Your Small Business Plan

Writing the business plan can seem tedious and sometimes overwhelming. When it comes to the market analysis, the goal is to understand the market so you can sell as much of your product or service as possible. An easy way to stay focused on this goal is to remember three C's:

  • The customer
  • The competition
  • The company

Your Customers and Your Home Business Plan

The better you know your customer, the easier, faster, and cheaper you'll be able to attract and sell to them. You need to determine:

  • Who they are
  • Their age
  • Their gender
  • Where they live
  • What do they like and dislike
  • What solutions do they need that you can provide
  • Their social-economic status
  • Their size: Is there a large enough group of these people to support your business

Your Competition and Your Home Business Plan

Next, you need to know who you're going to be competing with. Don't worry if there is competition because it's a sign that there is a market for what you want to offer. At the same time, if there is a lot of competition, or a company that gets the lion's share of the business, you need to know that and figure out how you can edge your way in.

When you are examining your competition, include not just your direct competition -- businesses that are already providing the same product or service your small business will provide, but also, take a look at alternatives your potential customers might use in place of your company or its competitors. For example, if you were going to start a small business that offers web design services, you should look at other web design businesses, but also check out resources like Wix and GoDaddy that allow your potential customers to build their own websites quickly and easily.

Your Company and Your Home Business Plan

Once you've looked at your customers and your competitors, you need to figure out how and where your small business will fit in this market. What is your competitive advantage and how will you make the market understand the unique value your small business has to offer? In essence, how will your business be different, better, or unique from your competition, and how much of the market will want your version of the product or service?

What Else to Research for the Market Analysis of Your Home Business Plan

While the focus is on understanding the market and how your market will compete, there are other parts to this section that you need to research and include, such as:

  • Market Growth: Whether the demand for your products or services is growing, and if so, by how much and the projections for future market growth. You can also include whether you plan to offer new products or improvements to your products in the near future that will help you capture additional portions of your market or strengthen your competitive advantage.
  • Market Trends: Will there be changes in the future that can impact the business. For example, if a material for your product goes up in price, what sort of impact will that have on the business? This can also include external influences that could increase the demand for your products or services in the future. Finally, you can include whether or not your competition is expected to grow stiffer in the years ahead, and by how much.
  • Barriers to Entry: What about this business or how you'll run it that would be hard for someone else to replicate. Funding sources for your business want to see that another business can't just jump in and take your market share. For example, if you have specialized knowledge others don't have, that knowledge could be a barrier for a future business wanting to compete with you. Other barriers can include technology, start up investment (expensive to start), location, regulations, access to resources, and distribution channels.
  • Regulations: Any rules or regulations that apply to your business and how you'll meet them.

Where to Find Information to Use in Your Home Business Plan

The easiest and fastest way to get information about your market and competitors is by using the Internet. You can get demographic data from the U.S. Census Bureau. Google searches on keyword phrases your clients or customers would use to find your product or service can help you find your competitors. Visit each competitors' site to see what they offer, how they offer it, and note how you can do it better or differently.

You can also seek feedback directly from your market, asking them what they look for in the product or service, how much they're willing to pay, and how they go about finding a business to buy the product or service.

Writing the Marketing Analysis of Your Business Plan

Like other parts of the business plan, it can be helpful to open this section with a brief summary of what will be in the marketing analysis section. Below is a sample outline to use in your Marketing Analysis:

  1. Introduction and summary
  2. Target Market
  3. Market Need
  4. Competitive Analysis
  5. Projections (Market Growth and Market Trends)
  6. Barriers to Entry
  7. Regulations

This section can be the most time consuming and difficult areas to sell to your potential investors, who view this area as critical to your small business success. All of the statistics and data you incorporate in your market analysis should be related back to your company and your products and services. One way to quickly illustrate the data you gather is with charts and graphs. Graphs and charts can help you make a point. For example, it's one thing to say that your small business market is expected to grow by 300 percent over the next five years, but when placed in a graphic, the growth can really capture the reader's attention.

By including graphics within each section of your small business plan, readers won't be forced to jump back and forth to the Appendix for supporting information. More on the Appendix area of your small business plan later.

You're Not Done with Marketing Information Yet

The Marketing Analysis section of your business plan is focused on understanding the market, your competition, and how you'll compete. Must of this same information will be needed to complete the section on Marketing and Sales Strategies as well as in creating your marketing plan.

Next up for a small business plan: Writing a Business Plan - Marketing & Sales Strategies