How to Write a Market Analysis | Bplans Blog (2023)

How to Write a Market Analysis | Bplans Blog (1)

Doing a market analysis might sound overly daunting and formal, but don’t be dissuaded. It’s actually really important, and it’s not all that complex.

A market analysis is the process of learning the following:

  • Who are my potential customers?
  • What are their buying and shopping habits?
  • How many of them are there?
  • How much will they pay?
  • Who is my competition?
  • What have their challenges and successes been?

The market analysis is one of the most important parts of any startup strategy. It can actually help reduce risk because if you really understand your potential customers and market conditions, you’ll have a better chance of developing a viable product or service.

It should also help you get clear on what exactly makes you different from your competition, which can make or break your chances of standing out ina crowded landscape.

However, don’t fall into the trap of simply saying that your solution is for everyone. Ultimately, setting some parameters around your target market will help you focus your resources.

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Ultimately, your market analysis should enable you to:

  1. Avoid putting a lot of resources and time into creating a product or service before you’ve determined that your solution is needed.
  2. Determine that the need for your product or service is big enough that people will pay for it.

Do you even need to do a market analysis?

Bear in mind that all new businesses are different, and strategies for structuring a business plan can be different depending on the goal of the plan or the intended audience. If your business is quite small and you know your customers inside and out, a deep, formal market analysis might not be the best use of your time.

For instance, if you are writing an internal business plan, meaning that you’re not going to use it to try to secure a loan or other funding, you may not have a specific reason to spend time reviewing industry data to corroborate your financial forecast. Be sure to assess the value of this information for your business; determine why you’re doing an analysis in the first place so that you don’t waste time and energy on an unnecessary aspect of your plan.

On the other hand, if you’re not absolutely clear on what makes your business different from the competition, or if you have made (but not tested) some assumptions about who will be interested in your product or service, you might want to consider at least an abbreviated market analysis. You’ll want to make sure that the business you’re building is solving a real problem, and that consumers both desire your solution and are willing to pay for it. A market analysis is a good way to get clarity.

Finally, if you are seeking funding, a market analysis is going to be key data to convince your audience that your business idea has the facts and hard numbers to back it up.

Market analysis and your business plan

It’s smart to write a business plan, especially if you are beginning a new business venture. Even if you’re a sole proprietor or don’t intend to borrow any money to get your business off the ground, it’s important to have a clear plan in place. The market analysis isn’t just one part of a successful business plan—it’s one of the best reasons to write one.

If you do need banks to lend you money or investors to jump on board, a market analysis section is required, as savvy lenders or investors will need to know that the business you’re pitching has viable market appeal.

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Either way, a solid formal business plan or Lean Plan complete with market analysis will be invaluable. You’ll need to identify your potential customers and attract investors, and it will help you to be clear about what you want to do with your business, both now and in the future.

The time you spend doing the research and putting it all together will come back to you many times over in dollars earned and heartbreaks avoided. You’ll look like a professional, and you’ll outshine the competitors that didn’t write one.

Because you’ll know the size of the mountain you’re about to climb, you’ll be able to pace yourself and prevent problems in the future. But most importantly, thoroughly understanding your market means that you’ll be able to build the best solution possible for your customers’ problem.

What to include in your market analysis

Your market analysis should include an overview of your industry, a look at your target market, an analysis of your competition, your own projections for your business, and any regulations you’ll need to comply with.

1. Industry description and outlook

This is where you’ll outline the current state of your industry overall and where it’s headed. Relevant industry metrics like size, trends, life cycle, and projected growth should all be included here. This will let banks or investors see that you know what you’re doing, and have done your homework and come prepared with the data to back up your business idea.

2. Target market

In the industry section of your market analysis, you focused on the general scope. In this section, you’ve got to be specific. It’s important to establish a clear understanding of your target market early on. A lot of new entrepreneurs make the rookie mistake of thinking that everyone is their potential market. To put it simply, they’re not.

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For example, if you’re a shoe company, you aren’t targeting “everyone” just because everyone has feet. You’re most likely targeting a specific market segment such as “style-conscious men” or “runners.” This will make it much easier for you to target your marketing and sales efforts and attract the kinds of customers that are most likely to buy from you.

This is a good thing; by narrowing in, you’ll be able to direct your marketing dollars efficiently while attracting loyal customers who will spread the word about your business.

The target market section of your business plan should include the following:

  • User persona and characteristics: You’ll want to include demographics such as age, income, and location here. You’ll also need to dial into your customers’ psychographics as well. You should know what their interests and buying habits are, as well as be able to explain why you’re in the best position to meet their needs.
  • Market size: This is where you want to get real, both with the potential readers of your business plan and with yourself. How much do your potential customers spend annually on the types of products or services you plan to offer? How big is the potential market for your business?

3. Competitive analysis

This is the section in which you get to dissect your competitors, which is important for a couple of reasons. Obviously, it’s a good idea to know what you’re up against, but it also lets you spot the competition’s weaknesses. Are there customers that are underserved? What can you offer that similar businesses aren’t offering?

The competitive analysis should contain the following components:

  • Direct competitors: What other companies are offering similar products and services? What companies are your potential customers currently buying from instead of you?
  • Indirect competitors: If your company is creating a new product category, perhaps you aren’t competing with similar companies, but instead competing with alternate solutions. For example, Henry Ford wasn’t competing so much with other car companies, but was instead competing with other forms of transportation such as horses and walking. A more modern example might be a to-do list application, where the indirect competition would include notebooks and hand-written lists.
  • Competitor strengths and weaknesses: What is your competition good at? Where do they fall behind? Get imaginative to spot opportunities to excel where others are falling short.
  • Barriers to entry: What are the potential pitfalls of entering your particular market? What’s the cost of entry—is it prohibitively high, or can anyone enter? This is where you examine your weaknesses. Be honest, with investors and yourself. Being unrealistic is not going to make you look good.
  • The window of opportunity: Does your entry into the market rely on time-sensitive technology? Do you need to get in early to take advantage of an emerging market?

4. Projections

At this point, your projections are educated guesses, so don’t worry aboutabsolute accuracy. However, it pays to be thoughtful and avoid hockey-stick forecasting.

  • Market share: When you know how much money your future customers spend, you’ll know how much of the market you have a chance to grab. Be practical, but don’t sell yourself short. Make sure you are able to explain how you came up with your numbers. Don’t make the mistake of saying that you’ll easily get 1 percent of a huge market, and that this is enough to grow a successful business. Instead, do a bottom-up projection where you explain how your marketing and sales efforts will enable you to get a certain percentage of the market.
  • Pricing and gross margin: This is where you’ll lay out your pricing structure and discuss any discounts you plan to offer. Your gross margin is the difference between your costs and the sales price. Again, be realistic yet optimistic. Optimistic projections not only serve as a guide—they can also be a motivator.

5. Regulations

Are there any specific governmental regulations or restrictions on your market? If so, you’ll need to bring them up here and discuss how you’re going to comply with them.

You will also need to address the cost of compliance. Addressing these issues is essential if you are seeking investment or money from a lender, and everything has to be legally squared away and above board.

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How to acquire the data for your market analysis

Market analyses vary from industry to industry and company to company. The hard truth is that some of the information you wish to include may not be publicly available. A little estimation is okay, but the bulk of your numbers need to be based on facts. Here are some good places to start your market research:

  • Your current customers: If your business is already up and running, your current customers are an invaluable resource. They are your existing market. You can use online surveys or social media to gather feedback about buying habits, needs, and other psychographic information.
  • U.S. Census Bureau: Here’s where you’ll find demographics you can use to figure out your market share. There is plenty of other information you can use in your market analysis here as well.
  • The go-to place for national industry information, as well as links to state and local resources.
  • U.S. Small Business Administration: The SBA offers industry guides, development programs, and local resources, as well as loan guarantees when the time comes.
  • Bureau of Labor Statistics: The BLS is the place to find out where your industry has been and where it is headed.
  • The U.S. Department of Commerce has a lot of good general information that you may be able to use, depending on your industry.
  • The internet: You can do internet searches to find information about any state or local regulations or licenses you may need for your industry. As always, there’s a lot of stuff out there, so make sure you’re depending on reliable sources. For your market analysis, Wikipedia won’t cut it.

Ultimately, conducting a market analysis will help you uncover any blind spots. It should help you do some initial tests that will verify that your solution is actually addressing a real problem—and many startups don’t last simply because founders failed to figure out if anyone was interested enough in their solution to pay for it.

Whether you do a comprehensive analysis, or just spend a few hours on a leaner version, what you learn can be the difference between thriving and struggling.

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Michael Kerr

Michael Kerr began his professional life as an entrepreneur. He built and managed a number of successful businesses before returning to school to indulge his passion for writing.


How do you write a simple market analysis? ›

How to do a market analysis in 6 steps
  1. Research your industry. ...
  2. Investigate the competitive landscape. ...
  3. Identify market gaps. ...
  4. Define your target market. ...
  5. Identify barriers to entry. ...
  6. Create a sales forecast.
Jul 15, 2022

What are the five 5 ways in analyzing market need? ›

5 Keys to Conducting a Market Opportunity Analysis
  • Research your customers and competition. ...
  • Get a high-level view of the market. ...
  • Explore adjacent opportunities. ...
  • Understand the business environment factors. ...
  • Find the market research you need fast.
Sep 10, 2018

What are the 4 types of market analysis? ›

Four common types of market research techniques include surveys, interviews, focus groups, and customer observation.

What are the 4 steps to write an analysis? ›

Choose your argument. Define your thesis. Write the introduction. Write the body paragraphs.

What are the seven 7 basic questions in market research? ›

What Market Research Questions should I ask in my Customer Survey?
  • Who is our ideal customer? ...
  • What do they struggle with? ...
  • What does your ideal customer really WANT? ...
  • What sets you apart from your competition? ...
  • Who is currently buying from us? ...
  • Why are other people not buying from us? ...
  • Who can buy from us in the future?

What questions do you answer in an analysis? ›

Analysis Questions
  • What is a typical value?
  • What is the uncertainty for a typical value?
  • What is a good distributional fit for a set of numbers?
  • What is a percentile?
  • Does an engineering modification have an effect?
  • Does a factor have an effect?
  • What are the most important factors?

What is a summary of market analysis? ›

A market analysis provides insights into potential customers and your competition. The core components of the market analysis are: Industry analysis: Assesses the general industry environment in which you compete. Target market analysis: Identifies and quantifies the customers that you will be targeting for sales.

What is market analysis and examples? ›

What is a market analysis? A market analysis is a quantitative and qualitative assessment of a market. It looks into the size of the market both in volume and in value, the various customer segments and buying patterns, the competition, and the economic environment in terms of barriers to entry and regulation.

What are the six steps of marketing analysis *? ›

The 6 steps in the marketing process
  • Identify the opportunity. The first step is to define the problem you're aiming to solve. ...
  • Develop a research plan. ...
  • Collect the data. ...
  • Analyze your data. ...
  • Present your results. ...
  • Incorporate your findings.
Apr 6, 2022

What are the 5 C's of marketing analysis? ›

The 5Cs are Company, Collaborators, Customers, Competitors, and Context.

What are the seven 7 elements of market? ›

Since then, the theory has been expanded into the 7 P's of marketing. Which are: Product, Price, Promotion, Place, People, Packaging, and Process.

What are the 3 most important elements of market research? ›

These all are included in the key elements of a marketing research report.
  • Product research.
  • Distribution research.
  • Advertising and promotion research.
  • Sales research, covering methods and policies.
May 31, 2022

What are the five 5 elements of market structure? ›

The elements of Market Structure include the number and size of sellers, entry and exit barriers, nature of product, price, selling costs.

What are the 3 methods of analysis? ›

Descriptive analysis, which identifies what has already happened. Diagnostic analysis, which focuses on understanding why something has happened. Predictive analysis, which identifies future trends based on historical data.

What is market analysis tools? ›

Marketing analytics tools are software platforms that help marketers understand the health of their marketing campaigns. They may track a variety of key metrics including website traffic, page views, click through rates, or many others in order to inform a marketer of which efforts are working, which aren't, and why.

What are the 7 steps to analysis? ›

Here are seven steps organizations should follow to analyze their data:
  1. Define goals. Defining clear goals will help businesses determine the type of data to collect and analyze.
  2. Integrate tools for data analysis. ...
  3. Collect the data. ...
  4. Clean the data. ...
  5. Analyze the data. ...
  6. Draw conclusions. ...
  7. Visualize the data.
Aug 24, 2021

What are the 5 levels of analysis? ›

Using five levels of analysis (explicit, implicit, theoretical, interpretive, and applicable) addresses this concern by challenging students to comprehend the central ideas of texts, interrogate in terms of social justice, connect concepts to their immediate realities and extrapolate useful ideas to apply to their ...

What are the five 5 common market research questions? ›

Examples of market research questions
  • Demographic questions e.g. How old are you? ...
  • How likely are you to recommend us to a friend?
  • Did you consider any of our competitors? ...
  • What do you wish our product could do?
  • How would you rate your most recent experience with us?
  • How long have you been a customer?

What are the 7 C's of marketing? ›

In contrast to other marketing models, the 7 Cs Compass Model considers both the marketing strategies as well as the segment to which the strategies are being targeted. The seven Cs are Corporation, Commodity, Cost, Communication, Channel, Consumer and Circumstances.

What are some good marketing questions? ›

Commonly Asked Marketing Questions
  • How can it help address your target audiences throughout the customer purchase journey? ...
  • How does it drive revenue? ...
  • How can we make something “go viral”? ...
  • How does marketing strategy work? ...
  • What's the difference between a marketing strategy and marketing tactics?

How do you write a good analysis question? ›

A good analytical question:
  1. Speaks to a genuine dilemma in the text. ...
  2. Yields an answer that is not obvious. ...
  3. Suggests an answer complex enough to require a whole essay's worth of argument. ...
  4. Can be answered by the text, rather than by generalizations or by copious external research.

How do you write an analytical answer? ›

Here is a step-by-step guide for writing an analytical essay.
  1. Choose a point of view. ...
  2. Write an introductory paragraph ending in a thesis statement. ...
  3. Carefully organize the body of your essay. ...
  4. Craft clear topic sentences. ...
  5. Populate your essay with evidence. ...
  6. Provide space for contrasting opinions.
Jun 7, 2021

What are the four analytical questions? ›

The four questions of data analysis are the questions of description, probability, inference, and homogeneity. Any data analyst needs to know how to organize and use these four questions to be able to obtain meaningful and correct results.

How do you write an analysis summary? ›

The summary should provide your reader with an overview of the text in the briefest manner possible.
  1. Only mention the important plot details.
  2. Keep your writing in the present tense.
  3. Make the summary as brief as possible—omit unnecessary details.
  4. Although you can use citations in summary, they are not necessary.

How do you write a market analysis conclusion? ›

Highlight only the key points that summarize your main pieces of information, which might include new, important facts, projections or a justification for the reader. Most importantly, don't introduce any information in the conclusion that wasn't in the actual report because this may confuse your reader.

How do you write a market analysis in a business plan example? ›

You can start the market analysis section with a simple summary that describes your target customers and explains why you have chosen this as your market. You can also summarize how you see the market growing, and highlight one or two projections for the future.

What are the 2 most essential factors in analyzing the market need? ›

There are two factors you need to look at when assessing the size of a market: the number of potential customers and the value of the market.

What are the elements of a good analysis? ›

The elements to be analyzed are plot, setting, characters, point of view, figurative language, and style. This will serve as the evidence/support throughout your paper. Setting: Is there anything to note about the role that time of day plays in the story?

What are the six steps of marketing analysis? ›

The 6 steps in the marketing process
  • Identify the opportunity. The first step is to define the problem you're aiming to solve. ...
  • Develop a research plan. ...
  • Collect the data. ...
  • Analyze your data. ...
  • Present your results. ...
  • Incorporate your findings.
Apr 6, 2022

What are the eight 8 dimensions of a market analysis? ›

Consumer segmentation, purchasing decisions, direct and indirect competitors, complementary products and services, industry, foreign markets and environmental analysis are the eight types of analysis that will help your organization identify new market opportunities.

What are the key success factors in market analysis? ›

Key Success Factors
  • Access to essential unique resources.
  • Ability to achieve economies of scale.
  • Access to distribution channels.
  • Technological progress.

What are the seven 7 Characteristics of a good marketing research? ›

In this article we are listing below the 7 characteristics of Good Marketing Research:
  • 1 Scientific Method. ...
  • Research creativity. ...
  • Multiple Methods. ...
  • Interdependence of models and data. ...
  • Value and cost of information. ...
  • Healthy skepticism. ...
  • Ethical marketing.
Jun 8, 2006

What makes a strong written analysis? ›

Answer Questions that Explain and Expand on the Evidence

Questions can take the form of explaining the evidence or expanding on evidence; in other words, questions can give context or add meaning. Asking both kinds of questions is crucial to creating strong analysis.

What are the five typical steps in an analysis? ›

In this post we'll explain five steps to get you started with data analysis.


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