Market Analysis for Your Business Plan
To be able to make a successful business you must understand the market you are in, and you will have to perform some sort of analysis to gain this understanding. A comment on your market analysis should be included in your business plan.
Analyse Your MarketMarket analysis is an investigation and analysis of the market that you are interested in joining, and the businesses (your competitors) who are already operating in the market. The analysis should help you make decisions about many things concerned with running your business:
- Staffing levels
This list is not exhaustive. The fact is that market analysis will impact almost everything about your business.
Market analysis is a precursor to setting out your marketing strategy and marketing plans. Without understanding the market, you cannot put together a sensible and sustainable marketing strategy. There are companies who deal with market data who will be able to help with market analysis, but there will be a cost attached. However, without this information you are keeping your business in the dark about the market.
Market Demand And Company DemandMarket analysis will also help you with your financial forecasting. To construct your key forecasts of: sales forecasts, cashflow forecasts, profit and loss forecasts; you will need to understand two fundamental aspects of the market.
- market demand
- company demand
Market demand is the total volume of sales that can be achieved in a defined marketing environment, in a set time period, in a defined geographical area.
Company demand is market demand multiplied by company market share.
This is harder to estimate than market demand, especially for a new business. The share of a market that a company achieves will depend on many factors: how it and its services, products, brands, prices are perceived by consumers.
Who Are Your Customers?Market analysis should give you some knowledge of:
- Who your customers are
- What their needs are
- How, where and when they buy
Past customers can give a good guide as you have actual data on their buying habits. Although these habits may be no guide to future buying habits, you should be able to study non-buyers, slow buyers and lost buyers as well as those that did buy.
The way current customers in the market are buying similar goods or services to yours is also a key part of the analysis. Are the customers in a single market sector? Can you spread to another sector? Can you sell other products to existing customers? Who are your competitors and what are their marketing strategies?
Are there gaps in the market that you could exploit to attract future customers? Market analysis could extend to other market sectors, and look for new types of customers.
SWOT AnalysisAs well as analysing the market, it is useful – even at the outset – to analyse your own position. A SWOT analysis looks for Strengths, Opportunities, Weaknesses and Threats.
Strengths and Weaknesses are internal to the business, and external circumstances can be categorised at Opportunities or Threats.
The best way to identify your strengths and weaknesses is to have a brainstorm session with the key people in your business. To understand opportunities and threats, it is once again useful to turn to the data you have from market analysis.
Armed with information from your SWOT analysis, you should make plans to deal with what you have discovered. In particular what you have learnt about Opportunities and Threats should help to form part of your marketing strategy.
Market analysis is vital for your business to move forward with the rights products to find the right customers – those who will buy. The analysis should be used to form your marketing strategy and marketing plans, which should be discussed in your business plan.