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Market Analysis




What is a market analysis?




A market analysis is a quantitative and qualitative assessment of a market. It looks into the size of the market both in volume and in value, the various customer segments and buying patterns, the competition, and the economic environment in terms of barriers to entry and regulation.




How to do a market analysis?




The objectives of the market analysis section of a business plan are to show to investors that:


  • you know your market
  • the market is large enough to build a sustainable business



Demographics and Segmentation




When assessing the size of the market, your approach will depend on the type of business you are selling to investors. If your business plan is for a small shop or a restaurant then you need to take a local approach and try to assess the market around your shop. If you are writing a business plan for a restaurant chain then you need to assess the market a national level.
Depending on your market you might also want to slice it into different segments. This is especially relevant if you or your competitors focus only on certain segments.
There are two factors you need to look at when assessing the size of a market: the number of potential customers and the value of the market. It is very important to look at both numbers separately, let's take an example to understand why.