Why Should You Be Building Your Own Market Analysis

Your market analysis is arguably the most important section of your business plan. A business plan that attracts investors is, above all, well-researched. So, while it is important to craft a plan with a concise executive summary and a visceral vision statement, your careful writing means citing nothing without the facts and figures to back it up.

An ideal market analysis will be loaded with these in the form of meaningful studies, statistics and graphs. According to the Harvard Business Review, 75 percent of all venture-backed startups fail. Better planning and more thorough market research could very possibly reduce this incredibly high proportion of failed businesses. Even if you’re planning on opening a small online business that requires no funding, writing a market analysis will greatly improve your advertising efforts, as it forces you to get to know your market so intimately.

In order to craft a great market analysis, you will first need a roadmap. Six important steps can function as a jumping off point to building your own market analysis.

Assess the Industry

Is your industry ripe for growth, or is it already mature? Is it large or small? How easy is it for newcomers to enter? You’ll need to address these questions honestly and openly in your market analysis, as they will inform all of your marketing tactics and paint a picture of your business’s realistic viability.

Identify Your Target Market

Pinpointing your target consumer is critical. Many think that their product or service will be useful to everyone. Unfortunately, this is simply not the truth. Through research, you’ll find that certain age ranges, for example, may prefer your product. Therefore, focusing your efforts on them will boost your returns on marketing campaigns.

Segment Your Audience

Divide your target market into further groups so that you can tailor your brand to speak to them directly. For example, your target audience may be 18- to 24-year-olds living in the Northwest. A slice of those consumers may be college students, who have radically different behaviors than other slices and are inclined toward a proclivity for softer marketing language.

Collect Relevant Data

After segmenting your audience into smaller slices, you’ll need to start collecting data applicable to them. What are their spending habits? Do they indulge in impulse buys? What is their average salary?

There is an overabundance of resources that can help you find answers to these questions, such as: the Bureau of Labor Statistics, the U.S. Census Bureau, the U.S. Small Business Administration, EconomicIndicators.gov, customer surveys, questionnaires and focus groups.

Estimate Your Market Share

You are never going to own 100 percent of the market share. You’ll be competing for consumers’ hard-earned cash every step of the way. If your industry promotes the rapid growth of newcomers, you could expect to gain a great deal of traction early on. Otherwise, it’s best to tackle your competitor’s strengths and weaknesses. Address how you will take advantage of the holes in their strategy to gain more market share, and again, back up your claims with research.

Utilize a Second Set of Eyes

Even the most experienced entrepreneurs need outside advice to perfect their market analyses. Have a trusted friend, fellow business owners or a market expert read over your market research carefully. Chances are they will find holes in your analysis. Having another pair of eyes critically examine your work will strengthen your research, making your overall business plan much more attractive to both investors and consumers.

How do you go about creating your own market analysis? One step at a time. While it can seem like a daunting task to newcomers, in reality, it just takes a good deal of patience and a little intuition. No one is expecting you to make exact predictions or to identify your target market with extreme precision.

Investors will be looking to see how well you know your industry, how dedicated you are to continue educating yourself about your market and how adeptly you can synthesize the knowledge you’ve acquired. Your market analysis will demand all these things from you, but if you follow these steps and concentrate your efforts, you may be more likely to succeed.