How to Write a Market Analysis


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:

    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 in a 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.

    Ultimately, your market analysis should enable you to:

      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.

      On the other hand, if you’re not absolutely clear on what makes your business different from the competition, orabout 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.

      Market analysis and your business plan

      It’s smart to , 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.

      Either way,orcomplete 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.

      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.

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

        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:

          4. Projections

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

            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.

            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:

              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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