How to Write a Business Plan
Parts of a Market Analysis 

What the Market Analysis Should Include

A Market Analysis should include a discussion of your:

  • Market opportunity. Your market opportunity is a quantification of the number of potential customers and the amount that they are willing to spend. This information shows a potential investor that the revenue estimates for your business are realistic and substantiated. Be sure to consider any observable market trends in your analysis and projections.
  • Competition. A potential investor tries to ascertain if you have identified all direct and indirect competitors. Have you presented a convincing description of how you will differentiate your product or service from competitor's offerings? Here, you should also present information on any government regulations or outside influences that help shape the competitive landscape.

  • Marketing strategy. How will the business make sure customers know about this product or service and come to prefer it to similar products or services offered by competitors? Your Market Analysis should include a brief discussion of how your company will use distribution, advertising, promotion, pricing, and selling incentives. Explain to your reader how you will sell your product to a single customer. Note: You will elaborate on the Marketing Strategy in another section of the business plan. Your description of the strategy in this section should serve as a summary, rather than step-by-step map of the process

Should you exaggerate in the Market Analysis in order to make your investment more attractive?
Paul Wimer
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     Ask Paul Wimer: Should you exaggerate in the Market Analysis in order to make your investment more attractive?

     Ask Paul Wimer: What's wrong with using the argument that "if I could get 1% of a huge market, then we would all be rich?"

  • Market research. Don't ask your reader to "trust you" on your analysis of the market. Substantiate your claims with some type of market research. Different types of research have varying degrees of credibility. Supporting research in this section might include, depending on the nature of your business:
    • Research you've done yourself (surveys, polls)
    • Existing industry research
    • Research you pay someone to do on your behalf
  • Financial forecasts. Other sections of your business plan will present more detail about your financial forecasts, but the market analysis should include your projected sales growth, market share, and amount of sales (by customer)—and details that can support your projections.


An Investor's Perspective
"Please don't tell me that you just need to get 1% of an enormous market. I need to understand why each and every expected customer will choose your product or service. Tell me how a real person in your target market will be convinced to buy this product."