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:
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. (See the sidebar for a sample of this section of the business plan, from the Royal Bank.)
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.
The How to Write a Business Plan instructions continue on the next page are tips for researching the market analysis section of the business plan, including sources for Canadian information.