Drafting a business plan it is important to do a market analysis. You should determine against who your business is going to compete, what the size of the market is, whether the market is profitable and who your customers will be.
A market analysis of your business may seems like a daunting task, but it is one of the most critical elements of your business plan. The following aspects as listed by Hanna Burmeister recently in the Grand Rapids Business Journal need to be analysed about the market in which you want to start your business:
Industry outlook (Market analysis)
A prospect business owner needs to find answers to the following questions:
- What’s happening in your industry?
- Describe the size of your industry, expected growth, any sales, operational or management trends.
- Is the industry seasonal? Are there expected economic fluctuations?
- Are there government regulations?
Addressing these industry characteristics helps provide a detailed picture of the environment in which your business is operating.
- Who is your target market?
- Identify your slice of the industry. Who is your business targeting, and what are their characteristics?
- What needs does your target market have?
- How big is the potential market for your business?
This analysis should include both demographics and psycho-graphics.
It’s important to spend some time analyzing your competitors. Indeed, by understanding what’s already out there, you can better determine your business’ competitive advantage. Therefore, competitive analysis should address the size of the market, competitor strengths and weaknesses, barriers to entry and market opportunities.
Do you know what market size and market share are? Knowing how much your potential customers spend will allow you to estimate how much of the market you can attract. Furthermore, you need to project your pricing structure and gross margins. These figures may help determine how profitable your business will be.
Additionally, all of the prior research you’ve conducted with your market analysis will help you with your pricing, gross margin and sales estimates.
Every business owner needs to know who her customers are. What her customers want and are willing to pay for. Where are her customers? Who are her competitors? A market analysis may help to answer these questions.
A well researched and written Business Plan helps to get your business started the right way.
Read also: Research Results Show Reasons Why Start-Up Businesses Fail