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How to Write and Conduct a Market Analysis
A market is the total sum of prospective buyers, individuals, or organizations willing and able to purchase a business’s offering. A market analysis is a detailed assessment of the market you intend to enter. It provides insight into the size and value of the market, potential customer segments, and buying patterns.
In this section, we’ll cover what information to include in your business plan after completing your research. If you’re struggling with the research itself, check out our market research resources for step-by-step guidance.
How to write your market analysis
The information in your market analysis should focus on defining your customers. Here are the two steps you need to take:
Define your target market
Finding your target market requires segmentation based on demographic and psychographic information. You need to address who they are and how you identified them.
Target market examples
A target market analysis is a key part of any business plan. Let’s walk you through some examples.
Determine your market size
Identifying your potential customers isn’t enough. You also need to prove that the market can support your business. To do this, it’s helpful to define what’s available, serviceable, and obtainable.
Optional information to include
The main purpose of the market analysis is to show who your customers are. While defining your target market may be enough, it can be helpful to include some of the following supporting details.
Show that you know your industry
Before starting a business, know the state and future of your industry. This includes industry metrics, barriers to entry, emerging trends, and common success factors.
Write a customer analysis
Conducting a customer analysis provides additional depth to your target audience. You’ll know them better and go beyond segmentation.
Use a customer persona to describe your customers
It can be difficult to visualize who your customers are based solely on data. Creating a customer persona can bring them to life and support your target market choice.
Why conduct a market analysis?
Conducting in-depth research can be time-intensive, but the benefits are worth it. It’s recommended that you revisit your market analysis at least once a year to stay on top of emerging trends or market changes.
As part of your business plan, it demonstrates a firm understanding of your customers. Here are the other benefits gained by completing a market analysis:
Reduce risk
If you understand your potential customers and market conditions, you’ll have a better chance of developing a viable product or service. It also helps you explore if your idea will work or not. If the market size can’t sustain your business or there are barriers, high starting costs, intense competition, or other factors that increase the chance of failure, you can pivot and avoid wasting time and money.
Better position your business
Researching the market landscape will help you strategically position your business. This may be done through pricing, features, production/distribution, or any other method to differentiate your business and make it more attractive to your target audience.
Verify product/market fit
Part of positioning your business is determining if there is a sustainable market for your business. This starts with segmenting and identifying your ideal customers. It involves gathering feedback, gauging interest, and finding traction.
Inform investors
Research is valuable for informing you as a business owner and convincing investors and lenders to fund your idea. The fact that you spent time pulling together viable information is just as important as the information itself. It shows that you care about finding success and are willing to put in the work.
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I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
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