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Small Business Plans - Writing the Market Analysis Section

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The Market Analysis section of your small business plan includes a description of your market, your niche, and the demand for your product or service (supported by documentation).

The Market Analysis section also needs to include the percentage of market share you envision and why.

In order to properly complete this section of your small business plan, you'll need to compile a fair amount of marketing research data to support your conclusions. While this section of your small business plan should present general highlights and conclusions of that marketing research data, the full details of your market research should be placed in the Appendix of your formal small business plan.

What to Focus on in this Section of Your Small Business Plan

One way to stay focused when writing this section of your small business plan is to remember three C's:

  • The customer
  • The competition
  • The company

After all, that's what marketing is all about.

Your Customers and Your Small Business Plan

You'll need to present information about your customers - who they are, what age groups they are likely to comprise, what they like and dislike, where they live, where they shop and what kind of market exists for your product or service.

Your Competition and Your Small Business Plan

You'll need information about your competition. You'll need to show that despite the competition that already exists in your marketplace there's a place for your small business.

When you are examining your competition, include not just your direct competition - businesses that are already providing the same product or service your small business will provide, but take a look at substitutes your potential customers might use in place of your company or its competitors.

For example, if you were going to start a small business that offers Web design services, you should not only look at other Web design businesses, but at services like Yahoo and others that allow your potential customers to build their own Websites quickly and easily.

Your Company and Your Small Business Plan

After you've looked at your customers and your competitors, how and where does your small business fit in this market? What is your competitive advantage and how will you make the market understand the unique value your small business has to offer? What share of the market do you expect to command, and why?

What Else to Include in this Section of Your Small Business Plan

You won't want to overlook additional important information that should be included in this section of your business plan, including:

  • Whether the demand for your products or services is growing, and if so, by how much and the projections for future market growth.
  • Whether your competition is expected to grow stiffer in the years ahead, and by how much.
  • Whether you plan to offer new products or improvements to your products in the near future that will help you capture additional portions of your market or strengthen your competitive advantage.
  • Any ideas you might have or external influences that could increase the demand for your products or services in the future.

Incorporating Charts and Graphs into Your Small Business Plan

The Market Analysis section of a formal small business plan can be one of the most time consuming and difficult areas to complete because it can be hard to find market information and demographics, especially for a small business that is offering products or services where a market hasn't fully been established yet. It can also be the most time consuming and difficult areas to sell to your potential investors, who view this area as critical to your small business success.

The nature of market information and demographics is such that it lends itself well to graphics like charts and graphs, so be sure to include them in your document. Make sure they look professional, are easy to understand and are properly labeled.

The audience for your small business plan will expect to see sharp graphics in your document, so don't over do it, but don't leave them out. A few graphics can cover a lot of text and saves your small business plan readers time when scanning through your document.

Graphs and charts can help you make a point. For example, it's one thing to say that your small business market is expected to grow by 300 percent over the next five years, but when placed in a graphic, the growth can really capture the reader's attention.

By including graphics within each section of your small business plan, readers won't be forced to jump back and forth to the Appendix for supporting information. However, you can include information on the source of the data from which the graphic was developed in the Appendix. Just use a reference number on the graphic's caption and create a table of references in the Appendix to explain the source used for each numbered graphic. More on the Appendix area of your small business plan later.

You're Not Done with Marketing Information Yet

Later in your small business plan development you'll need to include a section on Marketing and Sales Strategies.

Since you took the time to compile marketing information for the Market Analysis section of your small business plan, you may find it convenient to develop your marketing plan at this point. The content of your marketing plan (or at least the highlights of your marketing plan) will comprise the bulk of the information you'll need for the Marketing and Sales Strategies section of your business plan document.

Next up for a small business plan: Writing a Business Plan - Marketing & Sales Strategies

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