How To Write a Business Plan

When writing a business plan, the focus of the Market Analysis section is a thorough examination of your target market, those people that you intend to sell your products or services to.

The first step is to define your target market. Even if you intend on selling a service only in your own town, you're not selling that service to everyone who lives there. You need to know exactly what the people who might be interested in buying your product or service are like, and how many of them there are.

Then you need to make some projections about your target market, in terms of how much of your products or service they might buy, and how they might be affected by trends and policies.
How to Write a Business Plan: The Market Analysis

As always when you're writing a business plan, research is the key. Before writing the Market Analysis section of the business plan, use these general questions to start your research:

Target Market

How old are they?

What gender are they?

Where do they live?

What is their family structure (number of children, extended family, etc.)?

What is their income?

What do they do for a living?

What is their lifestyle like?

How do they like to spend their spare time?

What motivates them?

What is the size of your target market?

But don't stop here when you're writing a business plan. To define your target market, you need to ask the specific questions that are directly related to your products or services. For instance, if you plan to sell computer-related services, you need to know things such as how many computers your prospective customer owns. If you plan on selling garden furniture and accessories, you need to know what kinds of garden furniture or accessories your potential customers have bought in the past, and how often.

Projections About The Target Market

What proportion of your target market has used a product similar to yours before?

How much of your product or service might your target market buy? (Estimate this in gross sales and/or in units of product/service sold.)

What proportion of your target market might be repeat customers?

How might your target market be affected by demographic shifts?

How might your target market be affected by economic events (e.g. a local mill closing or a big-box retailer opening locally)?

How might your target market be affected by larger socioeconomic trends?

How might your target market be affected by government policies (e.g. new bylaws or changes in taxes)?

Writing the Market Analysis Section of the Business Plan

Once you have all this information, you'll write the Market Analysis in the form of several short paragraphs. Use appropriate headings for each paragraph. If you have several target markets, you may want to number each.

Remember to properly cite your sources of information within the body of your Market Analysis as you write it. You and other readers of your business plan will need to know the sources of the statistics or opinions that you've gathered from others.

Market Research Sources

But there are also a great many local resources for information about your target market that you'll want to explore. Besides the local library, the local Chamber of Commerce, Board of Trade, City Hall, Economic Development Centre, local government agent's office, provincial business ministry, local phone book and yellow pages will all have information that will help you define your target market and provide insights into trends.
Doing Your Own Market Research

These are all secondary sources of information (Others have conducted the research and compiled the information.) You may also want to conduct your own market research (use primary data). For instance, you might want to design a questionnaire and survey your target market to learn more about their habits and preferences relating to your product or service.

Does all this sound time-consuming? It is. But it needs to be done if your business plan is going to have any validity. You can have the most fantastic product or service in the world, but if no one's interested in buying it, it will just gather dust. If you don't have the time or the research skills to thoroughly define your target market yourself, hiring a person or firm to do the market research for you can be a wise investment.