How to Do a Market Analysis in a Business Plan

A market analysis is a thorough investigation of your target market, competitors, industry, and other market factors. Learning how to make market analysis in a business plan is an important step for any entrepreneur.

Customers' desire for your product or service is demonstrated by this analysis, along with how to best position your company to satisfy that demand. To put it plainly, a comprehensive market analysis demonstrates your comprehension of your market and your well-defined plan for success.

Understanding what is market analysis in a business plan is important. It's a section where you research and present key information about your market. A well-crafted market analysis in a business plan example covers:

• Industry Overview, which includes basic facts about the industry you're entering (size, growth, trends). Target Market is a clear definition of who you plan to serve.
• Customer Segments and Personas are groups of ideal customers with profiles showing their needs and traits.
• Market Size and Trends, which show how big your target market is and its growth path.
• Competitive Landscape, which includes key competitors, their market share, and strengths/weaknesses.
• Market Gaps and Opportunities which are unmet needs or underserved groups that your business can target.

By covering these components, the market analysis for the business plan answers, "Can my business thrive in this market?"

Market analysis shows you've done your homework and proves there's demand for your product. A strong market analysis:

Validates Your Idea

Uses data to prove customers want what you're selling and the market is big enough for your business.

Informs Strategy

Tells you who your target customers are and what they need. This ultimately shapes your marketing and sales.

Reduces Risk

Helps you avoid bad markets and find good opportunities early.

Grows Investor Confidence

Shows investors you understand your industry and have found a viable opportunity worth funding.

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A strong market analysis section will include several core components that cover all angles. Here are the main parts and what they include

Industry Overview

This is the big-picture view of the industry you're operating in, the current state of the industry, and where it's headed.

The important points to cover:

• Industry size & growth: How large is the industry, and is it growing, stable, or shrinking?

• Trends and drivers: Major trends affecting the industry, such as:

  • Technological changes
  • Regulatory shifts
  • Changing consumer preferences
• Key players: Who are the dominant companies or brands in this space?

Purpose: Sets the context for your specific business and shows you understand the environment you plan to operate in.

Target Market

Zero in on the specific market your business will serve.

Define your ideal customers:

• Are you targeting people, other businesses, or certain industries?
• What are the basic details, including age, gender, income, and location?
• What are their interests, behaviors, or problems your product solves?

Purpose: This exercise helps you focus your marketing efforts on your best customers.

Customer Segments and Personas

Split your target market into customer groups and create personas for each. For context, a persona here refers to a fake profile showing a typical person from a customer group.

For each segment, describe:

• Their goals
• What influences their buying decisions
• How they prefer to interact with businesses

Purpose: Makes your market analysis tangible and shows you really understand the people who will buy from you.

Market Size and Trends

Quantify your market with concrete numbers and estimates.

Three key market measurements:

• Total Addressable Market (TAM): This is the entire possible market size if you had no competition at all
• Serviceable Available Market (SAM): This is the part of TAM you can actually reach with your business
• Serviceable Obtainable Market (SOM): This is the part of SAM you think you can realistically get in your first few years

Market trends to discuss:

• Is the number of potential customers increasing or decreasing?
• Are consumer preferences shifting in a way that expands or contracts the opportunity?

Competitive Landscape

Identify who you're competing against for your target customers.

For each key competitor, note:

• Their pricing
• How much market share do they have (if known)
• What differentiates their offering
• Any weaknesses you could take advantage of

Purpose: Learning about your competition helps you build a better business plan.

Market Gaps and Opportunities

Find market gaps, which are customer needs that no one is meeting at the moment.

Look for:

• Customer groups that competitors ignore or don't serve well
• Problems or complaints that customers have, but no company has fixed yet
• Emerging trends that open up new niches (like new technology or demographic shifts)

Purpose: Show how your business will fill those gaps and connect your market analysis example for business plan to your business's value proposition.

Good market analysis for a business plan needs reliable information. Here are the best sources:

Government and Public Data

Free databases like Census/national statistics offices (demographics) and Bureau of Labor Statistics/trade departments (industry trends) for market growth data.

Industry Reports

Research firms like IBISWorld, Mintel, Nielsen, and Gartner publish detailed reports - look for free summaries or sample market analysis business plan references if full reports are expensive.

Trade Associations

Most industries have associations that publish research, annual outlooks, and consumer surveys for your market analysis in a business plan.

Competitor Publications

Check competitors' websites, marketing materials, and financial filings to learn their target markets and strategies.

Direct Customer Research

Conduct surveys, interviews, or focus groups with potential customers - even social media feedback provides valuable insights.

Online Tools

Use Google Trends (search interest), social media analytics (audience insights), and SEO keyword planners (demand data) to know how to conduct market analysis for business plan research.

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Investors expect to see that you've thoroughly analyzed who you're up against. Here's how to approach competitor analysis effectively.

Who Are Your Competitors?

Start by defining your competitive universe. You need to identify both types of competitors you'll face:

• Direct competitors: These are companies offering similar products to the same audience
• Indirect competitors: These are companies that solve the same customer problem in a different way

To find your competitors, think like your customers: "If my business didn't exist, where would they go instead?"

What Are Your Competitors’ Strengths and Weaknesses?

Once you have your competitor list, study each one carefully and compare them using these simple factors:

• Product quality/features: What they sell and what customers think about it
• Pricing: Are they expensive, cheap, or middle-priced?
• Market share: Are they market leaders or small companies?
• Marketing & brand: How famous are they and how strong their brand is
• Customer service: What people say about their service
• Innovation: Are they modern and new or old-fashioned?

Get this information by reading customer reviews, checking their websites, and trying their products or services yourself.

Predicting the future is hard, but your business plan needs demand and sales forecasts. Here's how to do a market analysis for a business plan to estimate market capture and speed:

Use Industry Benchmarks

Look for data on how similar businesses ramp up sales through industry reports or public financials to see common first-year figures.

Start With TAM/SAM/SOM Numbers

Get them from your market size analysis and decide what realistic portion you'll target initially, like aiming to acquire 1% of the local market in your first year.

Factor in Your Capacity and Marketing Plan

Your forecast should consider how you'll reach customers and how many you can serve. You can't sell 2,000 units monthly if you can only produce 1,000.

Project Multiple Scenarios

Create base-case, optimistic, and pessimistic forecasts that show you've thought through different outcomes, like moderate customer adoption versus going viral early.

Use Simple Formulas

For instance, units sold per period × average price for product businesses, or number of clients × average revenue per client for service businesses.

Justify Your Assumptions

State every assumption behind your numbers (like "5% of website visitors will buy" or "each sales rep closes 10 deals monthly") and back them up with evidence from similar companies when possible.

Market analysis can be complex, but these tools make it simpler:

• Business plan software gives you structured templates with questions and examples
• Excel or Google Sheets spreadsheet templates facilitate the organization of data for competitor comparisons and market size calculations.
• SWOT analysis tools assist in compiling your opportunities, threats, vulnerabilities, and strengths.
• Excel charts, Tableau, and Power BI are examples of data visualization technologies that transform data into readable graphs.
• Research sources and tasks are tracked via project management software such as Trello or Notion.

Tools help organize your work, but you still need to provide the insights. Use any market analysis sample in a business plan as a guide, not shortcuts.

Avoid these mistakes when doing your market analysis:

1. Relying on assumptions instead of seeking actual data. Don't assume "everyone will love this product" without proof.
2. Using outdated data since markets change quickly. Make sure your information is current.
3. Ignoring competitors by claiming "we have no competition." There's always some form of competition.
4. Targeting too broadly by defining your market as "everyone." Aim for a specific niche.
5. Overlooking risks like new regulations or economic shifts. Every market has challenges.
6. Data dumping without insight by sharing statistics without explaining what they mean for your business.

It's better to show a modest, well-researched opportunity than claim a huge opportunity without backing it up.

Present your research effectively with these tips:

• Start with a summary so busy readers get the main points fast.
• Add simple charts and pictures to make your section easier to read.
• Keep it short by focusing on important things and removing extra information.
• Make sure every fact relates to your business and explain how you use it.
• Organize clearly with headings that are easy to read.
• Show where your numbers come from to prove your research is reliable.

Your goal is to show you understand your market deeply and have a realistic plan to succeed in it.

When your audience is investors or lenders, they expect to see specific things in your market analysis:

Clear market need – show there's a defined problem your product solves and customers who urgently need that solution. Size and growth potential – since investors want businesses that can scale. A large or fast-growing market signals opportunity.

• Competitive edge
  • clearly explain how you'll beat competitors. This could be through better features, lower prices, patents, new business ideas, or a stronger team than others.
• Realistic projections
  • show sales forecasts that are hopeful but believable. Always explain the assumptions behind your numbers so investors can understand your thinking.
• Risks and mitigation
  • be honest about possible problems like new competitors entering your market or customer preferences changing.

Investors want to know: "Does this business owner really understand their market well, and is there enough opportunity here for good returns on our investment?"

Market research isn't a one-time task. Here's when to update it:

• Review key market metrics, including size and growth rate on a quarterly basis for markets that are changing quickly, and at least once a year for more frequent changes.
• Make sure that outdated data is still applicable before making big business decisions like shifting your company's course, introducing new goods, or breaking into untapped markets.
• Constant observation through keeping abreast of market developments, rival activity, and consumer trends. Keep watching for important changes.
• Refresh for investors if you wrote your business plan more than a year ago and you're now talking to new investors who want to see the latest facts and numbers.

Think of your market analysis sample in a business plan as a living document that evolves with your business and the market, keeping your business plan realistic and helping you make better strategic decisions.