A characteristic of entrepreneurs is being unafraid of a challenge. Writing a business plan is part of the challenge of taking a good idea for a business and then doing the research on what will make that idea success.
In a previous article, we addressed the second chapter of a business plan, the company description. In this instalment, we move onto writing the market analysis.
What is a Market Analysis?
The market analysis is one of the most important parts of your business plan. A market analysis includes a description of the intended market for a business’s product or service, explains how customers will find out about the business, and identifies the competition.
Define the market. Most businesses can easily define their market by what they offer. A baby-clothing store’s market is parents of very small children, most likely the mother as she probably does most of the shopping. A pet supply store would appeal to pet owners. A coffee-house style boutique restaurant located in a college town would likely target the young, well-educated students interested in getting a cup of good coffee while socializing in a comfortable, trendy setting.
Reaching the market. Here, the business owner explains how they plan on serving their customers and where they will do so. Some businesses will have a store front to sell their goods. Ideally, this store will be placed where their target market frequently passes by, making it easy and convenient for those customers to drop in. Other businesses may serve their customers entirely online. Still others might be operated out of a house or garage, sending goods via UPS or FedEx, or driving to their customer’s homes to provide a service.
Know the competition. This is a very important step. Knowing the competition and what they offer is integral to being able to compete with them. By studying competitors, a business owner can decide how best to attract customers who have the option of shopping elsewhere.
For many businesses today, the competition is not a local store or franchise, but an online presence. Many small bookstores struggled greatly and went out of business when the “big box” bookstores appeared in town; now those same big box stores have had to reckon with the online shopping giant Amazon.com.
In many ways, performing the market analysis is the real test of a business idea’s feasibility. Without a market – without a customer – there is no business. Giving the market analysis careful thought and detail will help you understand how your business can succeed.
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