How to Expertly Write the Market Analysis Section of Your Business Plan

What Is the Market Analysis in a Business Plan?

When you write a business plan, one of the most important sections is the market or industry analysis. This part shows your reader that you understand the market in which your business is competing. It also tells them if your business idea has room to grow, as clearly, if your market size is too small, your growth will be limited.

This section of your business plan discusses the size of your market, key market trends, and how this information will affect your business. Whether you run a small business or a large company, your market analysis section shows you’ve done your homework and really understand your industry.

In this article, I’ll break down this key section of your plan in a way that’s easy to understand. I’ll help you write an industry analysis that’s strong, simple, and smart. I will also point out misinformation that other business planning websites say about the industry analysis section.

Step 1: Begin With a Market Overview

Start your market analysis with a market overview. This means you describe the specific industry your business is in. Use your industry classification code to be exact. This code shows where your business fits in official records.

For example, if you sell clothes online, you might be part of the “E-commerce Retail” industry. That’s your particular market.

A great market analysis shows:

• What the industry sells or makes
• How big the market size is
• How fast the industry is growing or shrinking
• Industry trends happening now
• Any future prospects or changes expected

Look at historical data to see how the industry has changed over time. Use economic indicators like job growth, spending, or inflation. These tell the story of your external environment.

Step 2: Dive Into Market Analysis

Now that you’ve explained the big picture, zoom in on your target market. Who are your potential customers? What do they need?

Market analysis involves identifying:

• Age, income, and habits of your customers
• Where they live
• What problems they need solved
• How they shop and why

Use market research to find this information. This might come from surveys, interviews, or public industry reports. The more relevant data you use, the better.

This is also a great time to talk about consumer behavior. Are people spending more on your type of product? Are their tastes changing? These are external factors that affect your business.

Importantly, in the market analysis section, you’ll only lightly talk about your customers; you will spend more time detailing your customers’ needs in the customer analysis section of your plan.

Step 3: Study the Competition

Your readers need to know how you’ll beat the competition. That’s where your competitive analysis comes in.

Your business lives in a competitive landscape. It’s full of new competitors, old companies, and others trying to win the same customer base. You need to understand them well.

A good competition analysis or competitor analysis answers questions like:

• Who are your top competitors?
• What are their pricing strategies?
• How do they market themselves?
• What’s their market share?
• What’s their competitive advantage?

The goal is to find your own unique value proposition. This means the thing that makes your business better or different. That’s your competitive edge. Without one, it’s hard to stay competitive.

Once again, in the industry analysis section, you’ll only lightly talk about your competitors; you will spend more time detailing your competitors in the competitor analysis section of your plan.

Step 4: Use Industry Reports and Trade Associations

Don’t just guess what’s happening. Use solid sources. Great tools for your comprehensive industry analysis include:

• Industry reports
• Government websites
• News articles
• Trade associations

These give relevant data about your market size, market conditions, economic factors, and technological factors. You’ll learn what’s hot, what’s not, and where things are headed.

If you can, include charts, graphs, and tables in your industry analysis report. They help show numbers clearly. For example, show the growth potential over the next five years. This helps you forecast future demand.

Step 5: Explore External and Internal Factors

You can’t control everything. Things like political stability, environmental regulation, or new laws can hurt or help your business. These are part of the external environment.

Use PEST analysis to look at:

• Political factors
• Economic factors
• Social trends
• Technological advancements

This model analyzes the outside world around your business.

Now, take a look at what’s inside. Use a SWOT analysis. This means listing your:

• Strengths
• Weaknesses
• Opportunities
• Threats

This helps you make smart marketing strategies, build on what works, and fix what doesn’t.

Importantly, while both PEST and SWOT analyses are very helpful in understanding your market and the landscape in which you’ll be operating, they generally should not be included in your business plan. Particularly if you’re seeking funding, having a section showing your weaknesses and threats doesn’t help your case. If there’s information from your PEST and SWOT analyses that you’d like readers to review, feel free to include them in your appendix.

Step 6: Understand Market Positioning

Where does your business fit in the competitive dynamics of the market? This is called market positioning.

Are you the high-end brand? The low-price choice? The most eco-friendly? Your spot in the market must match what your target market wants.

Explain your business analysis here. How will your pricing strategies and promotional materials help you reach customers? Why will they choose you?

This is also where you discuss bargaining power. Who has more power—buyers or sellers? If customers have many choices, your power is low. If you offer something rare, you have high power. This affects how you set prices and grow.

In your market analysis, you will discuss overall marketing positioning. However, your choice of price positioning belongs in your marketing plan, while your discussion of competitors’ pricing strategies belongs in your competitive analysis section.

Step 7: Talk About Growth and Trends

People reading your plan want to know if the industry is strong. Is there potential growth? Are there emerging trends?

Use your comprehensive analysis to show what’s coming next. Point out market trends that matter. Will technological advancements make things easier or cheaper? Is the market size growing because of changing laws or habits?

Importantly, while you can and should point out your thoughts on future trends and demand, citing research reports that discuss trends and forecast future market demand bear even more weight on readers.

Step 8: Types of Industry Analysis to Use

There are different types of industry analysis. Use one or more to make your section stronger:

• Quantitative: Uses numbers and stats to show trends
• Qualitative: Looks at opinions, ideas, and expert insights
• Comparative: Compares your industry with others
• Historical: Looks at past changes to guess future ones

Mixing types helps show you’ve really done your research. That’s conducting industry analysis the right way.

Step 9: Make It Easy to Understand

Your industry analysis should be simple, clear, and focused. Don’t use too many big words. Use real facts, numbers, and examples.

Here are a few tips:

• Keep sentences short
• Use headers and bullet points
• Show charts when you can
• Explain any tricky terms

Always remember who’s reading. They might not be experts. Make sure your section can be understood by someone with no experience in your particular industry.

Step 10: Review, Update, and Improve

Your industry analysis report is never finished. As market conditions change, your info must stay fresh. Review your section often.

Update your plan when:

• New industry trends appear
• You get new market research
• Laws or rules change
• A new competitor shows up

The best business plans are living documents. They grow as the business grows.

Sample Market Analysis Section of a Business Plan

Here is a sample market analysis section. This one is very brief and to the point. Depending on your industry, it can be more thorough than this.

The Heart Monitors industry in the United States is currently a multi-billion dollar market, with a size of approximately $3.6 billion. This industry has been experiencing steady growth over the past few years, driven by increasing awareness about cardiovascular health and the importance of monitoring heart function. With a growing aging population and rising prevalence of heart-related conditions, the demand for heart monitors is expected to continue to increase in the coming years.

One of the key trends in the Heart Monitors industry is the shift towards wearable and wireless technology. Consumers are increasingly looking for convenient and user-friendly solutions to monitor their heart health on the go. This trend bodes well for HMS Heart Monitors, as they offer a range of innovative and cutting-edge wearable heart monitors that provide real-time data and insights to users. By tapping into this trend, HMS Heart Monitors can position themselves as a leader in the industry and attract a growing customer base.

Another trend in the Heart Monitors industry is the increasing focus on preventive healthcare and personalized medicine. As more individuals seek to take control of their health and prevent potential heart issues, the demand for accurate and reliable heart monitors is on the rise. HMS Heart Monitors, with their advanced technology and user-friendly design, are well-positioned to capitalize on this trend and cater to the evolving needs of consumers. By staying ahead of industry trends and continually innovating, HMS Heart Monitors can solidify their presence in the market and drive further growth and success.

Editable Market Analysis Template

Here is a Market Analysis Template you can copy and use:

Market Analysis Template

• Introduction: Provide a brief description of what the market analysis will cover.
• Step 1: Market Overview: Describe the specific market your business fits into, including market size, trends, and growth potential.
• Step 2: Market Analysis: Identify and describe your target market, including demographics and consumer behavior. Use market research to back up your findings.
• Step 3: Study the Competition: Analyze your competitors: who they are, their strengths, weaknesses, and how your business can stand out. Focus on your competitive advantage.
• Step 4: Use Industry Reports and Trade Associations: Use industry reports, government data, and trade associations to gather relevant and reliable data to support your analysis.
• Step 5: Explore External and Internal Factors: Analyze external factors such as political stability, economic factors, and technological advancements. Include PEST analysis.
• Step 6: Understand Market Positioning: Define where your business fits in the competitive landscape and explain your unique value proposition.
• Step 7: Talk About Growth and Trends: Explain the future trends in the industry, the expected demand, and how your business can leverage these changes for growth.
• Step 8: Types of Industry Analysis to Use: Discuss different types of industry analysis, such as quantitative, qualitative, comparative, and historical.
• Step 9: Make It Easy to Understand: Ensure your industry analysis is clear and simple, with easy-to-understand language, charts, and graphs where appropriate.
• Step 10: Review, Update, and Improve: Update your industry analysis regularly to reflect changing market conditions, new competitors, and other external changes.

And then: Summarize each of the 10 steps into a brief, compelling market analysis section for your business plan that highlights the market size and trends, and how both bode favorably on the future success of your company.

Final Thoughts: Why Market Analysis Is Important

A strong market analysis helps investors trust and believe in you. It shows you understand the external factors that affect your business. It proves you’ve looked at the competition, studied the market, and know your target market.

In short, your market or industry analysis in your business plan is your chance to show you’ve done the work. It’s where your ideas meet the real world. And if you do it right, it gives your business the best chance to win.

If you’re looking for a faster and more efficient way to put together your market analysis, an AI business plan generator like PlanPros can help. It simplifies the process by guiding you through each step, ensuring your analysis is clear, comprehensive, and aligned with your business strategy. This tool saves you time and effort, helping you create a professional business plan with confidence.

 

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