Market Analysis Business Plan. There are many people thinking about starting a farm business, but most of them are afraid of the risks involved in this field. The analysis is not only to make sure that you can earn enough profits after investing, but also to ascertain that you are capable of handling the expenses entailed in the business. It’s important to understand that managing funds can be one of the toughest tasks for an entrepreneur. And this is exactly where market analysis comes into play.
A business plan is the blueprint for taking an idea for a product or service and turning it into a commercially viable reality. The market analysis section of your plan provides the evidence that there is a niche in the market that your company can exploit. This analysis provides the foundation on which your marketing and sales plan will rest.
The core components of the market analysis are:
- an industry analysis, which assesses the general industry environment in which you compete.
- a target market analysis, which identifies and quantifies the customers that you will be targeting for sales.
- a competitive analysis, which identifies your competitors and analyzes their strengths and weaknesses.
The precise way in which you choose to organize this information is up to you. As long as you include all the basic facts, there are a number of outline forms that can work well. Just keep the purpose of your plan in mind, and highlight or expand the sections that have the greatest application to what you’re trying to accomplish.
It’s also important to realize that, as you go about planning a business startup or expansion, you should be doing a lot of research and learning an enormous amount about its marketing environment. Your business plan is not intended to include everything you’ve learned. It will just summarize the highlights, in a way that shows the reader that you understand your industry, market and individual business.
The industry
The industry analysis is the section of your business plan in which you demonstrate your knowledge about the general characteristics of the type of business you’re in. You should be able to present some statistics about the size of the industry (e.g., total U.S. sales in the last year) and its growth rate over the last few years. Is the industry expanding, contracting or holding steady? Why? Who are the major industry participants? While you might not compete directly against these companies (they are likely to be large national or international corporations), it’s important that you can identify them, and have a good understanding of their market share and why they are or aren’t successful.
You should also be able to discuss the important trends that may affect your industry. For example, significant changes in the target market, in technology, or in other related industries may affect the market’s perception of your product or your profitability.
This kind of information is often available for free from the following sources: trade association data industry publications and databases government databases (e.g., Census Bureau, state trade measurements) data and analysts’ opinions about the largest players in the industry (e.g., Standard & Poor’s reports, quotes from reputable news sources).
The Directory of On-Line Resources and the Data Base Catalog are popular services listing many resources available over your computer modem. Or if your prefer to do research the old-fashioned (print-based) way, consult a book called Knowing Where to Look: The Ultimate Guide to Research by Louis Horowitz, published by the Writer’s Digest. The American Marketing Association (the “other” AMA) may be able to help you as well. You can reach it by phone at 1-800-AMA-1150, or on the Internet at http://www.ama.org.
The target market
How do you determine if there are enough people in your market who are willing to purchase what you have to offer, at the price you need to charge to make a profit? The best way is to conduct a methodical analysis of the market you plan to reach. You need to know precisely who your customers are, or will be.
For example, if you sell to consumers, do you have demographic information (e.g., what are their average income ranges, education, typical occupations, geographic location, family makeup, etc.) that identifies your target buyers? What about lifestyle information (e.g., hobbies, interests, recreational/entertainment activities, political beliefs, cultural practices, etc.) on your target buyers? You may very well sell to several types of customers–for example, you may sell at both retail and wholesale, and you may have some government or nonprofit customers as well. If so, you’ll want to describe the most important characteristics of each group separately.
Directly surveying your current customers can be expensive. For planning purposes, it’s acceptable to substitute published industry-wide information; for example, “the average U.S. household computer owner is between the ages of 31 and 42, has graduated from college, and earns $40,000 to $60,000 per year.” Once obtained, this type of information can help you in two very important ways. It can help you develop or make changes to your product or service itself, to better match what your customers are likely to want. It can also tell you how to reach your customers through advertising, promotions, etc.
The competition
In the industry overview section of your business plan, you may have identified the largest players in your industry. Not all of these businesses will be directly competing with you, however. Some may be located in geographically distant locations, and others may have pricing or distribution systems that are very different from those of a small business. Therefore, in your competition analysis, you’ll focus on those businesses that directly compete with you for sales–the specific companies or brands that are direct competitors to your product or service, in your geographic locality.
In many cases, these competitors offer a product or service that is interchangeable with yours in the eyes of the consumer (although, of course, you hope you hold the advantage with better quality, more convenient distribution, and other special features). For example, if you operate a local garden center, you may compete against the other garden centers within a 10-mile radius.
You may also want to include in your analysis some competitors who offer similar products in a different business category or who are more geographically remote. It’s to your advantage to know as much as you reasonably can about the identity of your competitors and the details of your competitors’ businesses. Study their ads, brochures and promotional materials. Drive past their location (and if it’s a retail business, make some purchases there, incognito if necessary).
Talk to their customers and examine their pricing. What are they doing well that you can copy, and what are they doing poorly that you can capitalize on? Secondary data, as well as information from your sales force or other contacts among your suppliers and customers, can provide rich information about competitors’ strengths and weaknesses.
Basic information every company should know about their competitors includes: each competitor’s size and market share, as compared to your own how target buyers perceive or judge your competitors’ products and services your competitors’ financial strength, which affects their ability to spend money on advertising and promotions, among other things each competitor’s ability and speed of innovation for new products and services.
There may be a wealth of other facts that you need to know, depending on the type of business you have. For example, if you’re in catalog sales, you’ll want to know how fast your competitors can fulfill a typical customer’s order, what they charge for shipping and handling, etc. Even for new businesses, company data from competitors may be available by interviewing competitor company executives, attending industry trade shows, and asking the right questions from industry “experts.” They may be unaffordable as consultants, but willing to direct you to free databases that you would not ordinarily know of or have access to. And don’t overlook your competitor’s suppliers. They can be excellent sources of information to aid your research.
What Should a Market Analysis Include?
The market analysis section of your small business plan should include the following:
- Industry Description and Outlook: Detailed statistics that define the industry including size, growth rate, trends, and outlook.
- Target Market: Who is your ideal client/customer? This data should include demographics on the group you are targeting including age, gender, income level, and lifestyle preferences. This section should also include data on the size of the target market, the purchase potential and motivations of the audience, and how you intend to reach the market.
- Market Test Results: This is where you include the results of the market research you conducted as part of your initial investigation into the market. Details about your testing process and supporting statistics should be included in the appendix.
- Lead Time: Lead time is the amount of time it takes for an order to be fulfilled once a customer makes a purchase. This is where you provide information on the research you’ve completed on how long it will take to handle individual orders and large volume purchases, if applicable.
- Competitive Analysis: Who is your competition? What are the strengths and weaknesses of the competition? What are the potential roadblocks preventing you from entering the market?
7 Tips for Writing a Market Analysis
- Use the Internet: Since much of the market analysis section relies on raw data, the Internet is a great place to start. Demographic data can be gathered from the U.S. Census Bureau. A series of searches can uncover information on your competition, and you can conduct a portion of your market research online.
- Be the Customer: One of the most effective ways to gauge opportunity among your target market is to look at your products and services through the eyes of a purchaser. What is the problem that needs to be solved? How does the competition solve that problem? How will you solve the problem better or differently?
- Cut to the Chase: It can be helpful to your business plan audience if you include a summary of the market analysis section before diving into the details. This gives the reader an idea about what’s to come and helps them zero in on the most important details quickly.
- Conduct Thorough Market Research: Put in the necessary time during the initial exploration phase to research the market and gather as much information as you can. Send out surveys, conduct focus groups, and ask for feedback when you have an opportunity. Then use the data gathered as supporting materials for your market analysis.
- Use Visual Aids: Information that is highly number-driven, such as statistics and metrics included in the market analysis, is typically easier to grasp when it’s presented visually. Use charts and graphs to illustrate the most important numbers.
- Be Concise: In most cases, those reading your business plan already have some understanding of the market. Include the most important data and results in the market analysis section and move the support documentation and statistics to the appendix.
- Relate Back to Your Business: All of the statistics and data you incorporate in your market analysis should be related back to your company and your products and services. When you outline the target market’s needs, put the focus on how you are uniquely positioned to fulfill those needs.
Conclusion
The market analysis business plan example should be written in such a way, that it includes all the positive and negative factors about the market. Apart from financial projections and market trends, you should also give information regarding your specific capacities for serving the market to make your plan look reliable and trustworthy.