A Simplified Guide To Writing A Market Analysis

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By | Feb 1, 2016

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When formulating a startup strategy, a market analysis is one of those key components that shouldn’t be overlooked. This is the tool that helps you lure investors as well as customers while also guiding you to avoid various pitfalls that are common with startups. However, it’s important to assess your business needs and consumer knowledge to understand where a market analysis lies on your priority list. For example, if your business is small and thus know most of your customers personally, then a market analysis might not be essential at the time. Conversely, if you’re seeking investor funding, a market analysis might just be one of the must-haves.

So... the big question. 

How do you write a market analysis? If you need help, we've put together a simplified breakdown of the process below.

First Things First - What is Market Analysis?

To be fair, marketing analysis is as exactly as it sounds i.e. it’s quite straightforward in its definition. As such, all you need is to determine various unique features of a particular market and analyze the resultant information to help you make better business decisions. With the information you’ve collected, you’ll be better placed to understand your competitors and their frailties, your customer needs, as well as the pricing to set for your goods and services.

A Market Analysis Should Complement Your Business Plan!  

Here's Why and How:

We’re all aware of the importance of having a sound business plan when launching any new business venture. One of the key elements of a good business plan should be market analysis. This analysis is particularly more significant if you’re looking to welcome investors on board, now or in future. This is because it adds to the appeal of your plan to these investors or lenders thereby making the hassles involved in research worth it in the long run.

6 Crucial Things to Include In Your Market Analysis

1. Industry Description

In this section, try to offer a comprehensive overview of the current state of your industry by relying on relevant metrics such as size, life cycle, current trends, projected growth, etc. This displays your keenness to details and industry knowledge to lenders and investors.

2. Competitive Analysis

This is where you get to examine your competition as you seek to understand aspects such as their offerings as well as their weaknesses. To help you come up with a comprehensive competitive analysis, here are some of the key components to evaluate;

3. Market

Your focus here should be on determining the size of the market you expect to consume the products or services you’re offering. Besides, evaluate the projected growth rate, general trends, main competitors, etc.

Competitor Strengths and Weaknesses: There’s a need to be a bit more creative here as you try to spot where you can take advantage of your competition’s weaknesses. Besides, be keen to understand what customers are getting from your competition and whether you can better their offer.

Window of Opportunity: Is there an emerging market that offers more prospects? Is there a time-sensitive technology that might have an impact on your entry?

Barriers of Entry: Here, you’ll need to determine the possible pitfalls that might hamper your entry into the market, e.g. high cost of entry, market being too open for everyone, etc.

4. Target Market

The primary objective here is to try and narrow down your market while only targeting the most suitable customer base. This way, you can make your marketing and overall service to your customers more fulfilling. Here are some of the considerations to make when drafting your market analysis’s target market section.

Market Size: Try to be realistic while making various calculations such as the number of customers you expect to consume your products or services annually. Besides, research extensively to understand more about your competition and the potential market for your business.

Key User Characteristics: Here, you’ll need to factor in demographics such as user income, age, location, etc. Besides, take time to learn various consumer psychographics such as their buying habits, interests, etc.

5. Projections

Market Share: For this section, you’ll need to research about how much money (on average) your potential consumer is willing to spend on your service/product. Understanding this will assist you approximate your chances of succeeding in your market. Avoid selling yourself short, though, and ensure that you’re in a position to explain your calculations when needed.

Pricing and Gross Margin: Here, you’re required to formulate a realistic pricing structure that takes into account various price aspects including the discounts you aim to offer your consumers. Also, be sure to present a well-calculated gross margin which represents the difference between your overall costs and the sales price.

6. Regulations

In this section, you’ll show your readers how you plan to comply with any existing governmental regulations or restrictions in your market. Besides, you will also be required to take into account any additional costs involved in complying with these regulations.

Showing how you plan to observe these regulations is particularly crucial if you’re looking for investors or lenders who are often keen to ensure that everything is legally squared before getting into a deal with you.

Valuable Sources of Market Analysis Data

i. Your Current Customers: This is a hugely valuable data source segment although only feasible if you already have a running business. As such, try to convince your clients to offer information you need by requesting for their feedback, or for their response to your online surveys. Besides, try to be keen to learn aspects such as buying patterns and habits, needs, etc.

ii. Business.gov: Here, you'll find virtually all kinds of information regarding any national industry and links to various states and local resources.

iii. U.S. Census Bureau: This bureau offers an excellent source of the demographics that you might need for your market share analysis.

iv. U.S. Small Business Administration: With SBA, you’ll get valuable resources such as industry guides, local resources, development programs, and even loan guarantees when needed.

v. Commerce.gov: Depending on your industry, the Department of Commerce is another excellent source of information that you may find useful in your market analysis.

vi. Bureau of Labor Statistics: This portal helps you learn more about your industry, its current situation, as well as its prospects.

vii. Internet: Using the internet is a no-brainer really. A simple internet search will offer you tons of information about virtually anything you want to know for your market research. A caveat though is that you only need to use the trusted sources of information. Otherwise, you may end up gathering irrelevant, baseless information that might land you into trouble.

In the end, it boils down to a compelling document that supports your investors needs!

Market analysis varies significantly from one industry to another and from one organization to another. However, the basics remain the same, and that's exactly what we've outlined for you in this post. There are numerous ways you can get the information you need as seen here. Unfortunately, you may not always find all the information you want since some are not readily available to the public. In such situations, try making approximations, but again, be modest when doing this.

If you need help with the creation of your marketing analysis, creative brief, technology brief or a request for qualifications document / request for proposal please contact us here at 92 West and we'll be able to generate the documents that you'll need moving forward.

Troy Kadavy
Creative Director
92 West

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