A market analysis is an integral part of writing a business plan. It shows that you have conducted research into the market in which your business is entrenched. In this article we provide an overview on what a market analysis is, and how to do a market analysis for a business plan.
What is a market analysis?
A market analysis is a study of the current and future state of a particular industry. It helps in understanding the opportunities and threats that exist in the industry. It is a detailed overview and analysis of target demographics and buying trends, industry competition, and the overall health of the economy.
What should be included in a market analysis?
A market analysis typically consists of:
- Size of target market and industry
- Customer purchase trends and needs
- Analysis of competition and market share
- Any challenges in the industry
- Forecasted growth of your business
Qualitative vs quantitative market research
An effective market analysis will have both a qualitative and quantitative aspect. Quantitative analyses help with short-term predictions and include market statistics and forecasting. A lot of entrepreneurs use outside resources in business analysis techniques, such as financial experts.
Conversely, qualitative analyses are limited to data available and rely on opinions, which can be slightly subjective. There will always be a margin of error.