This article is about conducting a market analysis and is the second in a series of posts about the essential components of a business plan. To view the first post, click here.
A market analysis takes a hard look at your company’s industry, the size of your market, your ideal customer, and its direct and indirect competition. Below you will find important questions that you need to be able to answer in a market analysis.
What are you selling?
Identify the features, advantages, and benefits of your product or service. What makes them a good choice for consumers? What makes them unique? How do your products/services provide more benefits than those of your competition?
What industry are you looking at?
Describe the size of the industry and its potential for growth, as well as consumer trends within it and the risks/opportunities associated with them.
- How can you use these opportunities to an advantage?
- How can you mitigate the risks?
Note: it is important to have a plan regarding how your company will continue to make sales after a trend has passed.
Who are your customers?
Customers are an integral part of business, for obvious reasons. In a market analysis, you have to know exactly who your customers are. Create a persona that represents the demographic that you consider your target customer. goes into detail about:
- employment status/income levels
- shopping/consumption habits
- usage frequency of products/services similar to yours
What is the size of the total market, and how many of those people are prospective customers for your business? Give evidence of customer acceptance of your company as demonstrated by surveys, market tests, testimonials, proof of sales, etc.
Note: Information in the above section should support your sales projections.
Who is your competition?
Competition is a part of business, no matter what industry. It is important to identify who your competitors are and where they are located. You should also know detailed information about the products/services that they offer and their pricing structure.
- What are your competitors’ strengths and weaknesses?
- How can your company do better?
Note: statistical data must be included in your statements.