Your Business Plan Part 6: Market Analysis
Your Business Plan Part 6: Market Analysis
A business is only as strong as the strategy and expertise behind it, and your business plan plays an essential role in bringing together not only your own specialised knowledge and understanding of the business but also specific data and industry insight. It is here in the 6th section of your business plan, your market analysis, that you will be deep-diving into your market, to demonstrate the attractiveness of the market from a financial viewpoint. Your market analysis is also an opportunity to ‘flex’ your understanding of this market and how your business will thrive in this space.
Market Opportunity Analysis
This part of your document will lead with a summary of your market opportunity, and importantly, will identify the potential revenue.
Start by asking yourself – ‘What is the opportunity in the market that caught my attention, and why?’ Like many areas of your business plan, you want to ensure that you can clearly articulate the process of coming to your decision.
For example, your business may be targeting a specific niche in the market, and you may have discovered that your particular product is in-demand due to limited suppliers within Australia. You’ll want to detail whether this market opportunity is one that your competitors will also be looking to take a slice of, or whether you’ll have a monopoly over it.
When discussing the potential revenue of your opportunity (also known as your market value), summarise with an estimated total or window of value – you’ll be going into more financial detail further along.
Next up is your market structure – this is where you’ll place your business into the greater marketplace and the supply chain structure. Take the time to explain exactly where it slots in, and importantly, how you differentiate your business from others in this space.
For example, you may offer a service that is traditionally delivered in-store, but you’ve identified a way to bring this service to the customer’s home, giving you leverage over your competition in the market.
Market Size and Outlook
It’s now time to drill down on the financials, examining the potential revenue available within the market. Your market size and outlook generally comes down to two factors, volume and value. This is where current statistics are essential, so you’ll want to put some time into reviewing publicly and privately published reports and data (we’ve shared some useful resource websites in our previous Market Research post, so you may wish to revisit this for inspiration).
How many potential customers are there in this market? You may be selling exclusively to other businesses with larger volume orders, so you would detail how many of these businesses exist within your market. Or, you may be selling directly to customers where the volume of potential buyers will be much higher, but the average consumer purchase may be smaller.
Don’t forget to share the spending habits of your market (again, you may wish to refer to previous market research you’ve already completed) backed up with data. This section is all about providing the reader with the evidence on which you based your market decision.
To finish this section, you may like to share the direction you believe the market is moving – for example, adding evidence-backed market trends that may lead to an increase in value or volume, taking into consideration the economy and the demographics of your market.
Within your future markets section, you will outline the markets that have potential value for your business in the future or areas you plan to move into. Divide your information into local, national and international markets, and within each subsection, share a clear summary of the market structure, as well as the size and outlook.
As these markets aren’t your current target, don’t be concerned with too much detail, but ensure that you’ve got a future outlook for your business and the growth it could achieve within new markets.
Target Market Analysis
Your target market is the specific type of customer that you want to attract, and you’ll want to understand this group in detail, starting with their volume and potential value as well as any other relevant statistics.
For example, you may sell a premium product within a wider market of lower-end alternatives, so you will have a specific target audience for your product, and they will have certain motivators for engaging with your business over others, e.g. valuing quality and premium customer service. Outline the factors influencing the purchasing habits of your target market, and pull in any focus group or feedback data you’ve already requested from existing clients.
You’ll complete your target market section by explaining how your business will meet the requirements of the market, and how you plan to respond to changing market conditions (one thing certain in all markets is change, for example – will your prices or offering adapt to an economic downturn? Is your product a luxury item that may see a decline if your target market has less disposable income?).
You’ve now completed your market analysis, and you are halfway through your business plan document. By this stage, your understanding of the business has developed and matured significantly, and the upcoming sections will continue to illustrate the complete story of your business.