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8 Components of a Business Plan

Back to Business Plans

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on February 19, 2023

A key part of the business startup process is putting together a business plan , particularly if you’d like to raise capital. It’s not going to be easy, but it’s absolutely essential, and an invaluable learning tool.

Creating a business plan early helps you think through every aspect of your business, from operations and financing to growth and vision. In the end, the knowledge you’ll gain could be the difference between success and failure.

But what exactly does a business plan consist of? There are eight essential components, all of which are detailed in this handy guide.

1. Executive Summary

The executive summary opens your business plan , but it’s the section you’ll write last. It summarizes the key points and highlights the most important aspects of your plan. Often investors and lenders will only read the executive summary; if it doesn’t capture their interest they’ll stop reading, so it’s important to make it as compelling as possible.

The components touched upon should include:

The business opportunity – what problem are you solving in the market?
Your idea, meaning the product or service you’re planning to offer, and why it solves the problem in the market better than other solutions.
The history of the business so far – what have you done to this point? When you’re just getting started, this may be nothing more than coming up with the idea, choosing a business name , and forming a business entity.
A summary of the industry, market size, your target customers, and the competition.
A strong statement about how your company is going to stand out in the market – what will be your competitive advantage?
A list of specific goals that you plan to achieve in the short term, such as developing your product, launching a marketing campaign, or hiring a key person.
A summary of your financial plan including cost and sales projections and a break-even analysis.
A summary of your management team, their roles, and the relevant experience that they have to serve in those roles.
Your “ask”, if applicable, meaning what you’re requesting from the investor or lender. You’ll include the amount you’d like and how it will be spent, such as “We are seeking $50,000 in seed funding to develop our beta product”.

Remember that if you’re seeking capital, the executive summary could make or break your venture. Take your time and make sure it illustrates how your business is unique in the market and why you’ll succeed.

The executive summary should be no more than two pages long, so it’s important to capture the reader’s interest from the start.

2. Company Description/Overview

In this section, you’ll detail your full company history, such as how you came up with the idea for your business and any milestones or achievements.

You’ll also include your mission and vision statements. A mission statement explains what you’d like your business to achieve, its driving force, while a vision statement lays out your long-term plan in terms of growth.

A mission statement might be “Our company aims to make life easier for business owners with intuitive payroll software”, while a vision statement could be “Our objective is to become the go-to comprehensive HR software provider for companies around the globe.”

In this section, you’ll want to list your objectives – specific short-term goals. Examples might include “complete initial product development by ‘date’” or “hire two qualified sales people” or “launch the first version of the product”.

It’s best to divide this section into subsections – company history, mission and vision, and objectives.

3. Products/Services Offered

Here you’ll go into detail about what you’re offering, how it solves a problem in the market, and how it’s unique. Don’t be afraid to share information that is proprietary – investors and lenders are not out to steal your ideas.

Also specify how your product is developed or sourced. Are you manufacturing it or does it require technical development? Are you purchasing a product from a manufacturer or wholesaler?

You’ll also want to specify how you’ll sell your product or service. Will it be a subscription service or a one time purchase? What is your target pricing? On what channels do you plan to sell your product or service, such as online or by direct sales in a store?

Basically, you’re describing what you’re going to sell and how you’ll make money.

4. Market Analysis

The market analysis is where you’re going to spend most of your time because it involves a lot of research. You should divide it into four sections.

Industry analysis

You’ll want to find out exactly what’s happening in your industry, such as its growth rate, market size, and any specific trends that are occurring. Where is the industry predicted to be in 10 years? Cite your sources where you can by providing links.

Then describe your company’s place in the market. Is your product going to fit a certain niche? Is there a sub-industry your company will fit within? How will you keep up with industry changes?

Competitor analysis

Now you’ll dig into your competition. Detail your main competitors and how they differentiate themselves in the market. For example, one competitor may advertise convenience while another may tout superior quality. Also highlight your competitors’ weaknesses.

Next, describe how you’ll stand out. Detail your competitive advantages and how you’ll sustain them. This section is extremely important and will be a focus for investors and lenders.

Target market analysis

Here you’ll describe your target market and whether it’s different from your competitors’. For example, maybe you have a younger demographic in mind?

You’ll need to know more about your target market than demographics, though. You’ll want to explain the needs and wants of your ideal customers, how your offering solves their problem, and why they will choose your company.

You should also lay out where you’ll find them, where to place your marketing and where to sell your products. Learning this kind of detail requires going to the source – your potential customers. You can do online surveys or even in-person focus groups.

Your goal will be to uncover as much about these people as possible. When you start selling, you’ll want to keep learning about your customers. You may end up selling to a different target market than you originally thought, which could lead to a marketing shift.

SWOT analysis

SWOT stands for strengths, weaknesses, opportunities, and threats, and it’s one of the more common and helpful business planning tools.

First describe all the specific strengths of your company, such as the quality of your product or some unique feature, such as the experience of your management team. Talk about the elements that will make your company successful.

Next, acknowledge and explore possible weaknesses. You can’t say “none”, because no company is perfect, especially at the start. Maybe you lack funds or face a massive competitor. Whatever it is, detail how you will surmount this hurdle.

Next, talk about the opportunities your company has in the market. Perhaps you’re going to target an underserved segment, or have a technology plan that will help you surge past the competition.

Finally, examine potential threats. It could be a competitor that might try to replicate your product or rapidly advancing technology in your industry. Again, discuss your plans to handle such threats if they come to pass.

5. Marketing and Sales Strategies

Now it’s time to explain how you’re going to find potential customers and convert them into paying customers.

Marketing and advertising plan

When you did your target market analysis, you should have learned a lot about your potential customers, including where to find them. This should help you determine where to advertise.

Maybe you found that your target customers favor TikTok over Instagram and decided to spend more marketing dollars on TikTok. Detail all the marketing channels you plan to use and why.

Your target market analysis should also have given you information about what kind of message will resonate with your target customers. You should understand their needs and wants and how your product solves their problem, then convey that in your marketing.

Start by creating a value proposition, which should be no more than two sentences long and answer the following questions:

What are you offering
Whose problem does it solve
What problem does it solve
What benefits does it provide
How is it better than competitor products

An example might be “Payroll software that will handle all the payroll needs of small business owners, making life easier for less.”

Whatever your value proposition, it should be at the heart of all of your marketing.

Sales strategy and tactics

Your sales strategy is a vision to persuade customers to buy, including where you’ll sell and how. For example, you may plan to sell only on your own website, or you may sell from both a physical location and online. On the other hand, you may have a sales team that will make direct sales calls to potential customers, which is more common in business-to-business sales.

Sales tactics are more about how you’re going to get them to buy after they reach your sales channel. Even when selling online, you need something on your site that’s going to get them to go from a site visitor to a paying customer.

By the same token, if you’re going to have a sales team making direct sales, what message are they going to deliver that will entice a sale? It’s best for sales tactics to focus on the customer’s pain point and what value you’re bringing to the table, rather than being aggressively promotional about the greatness of your product and your business.

Pricing strategy

Pricing is not an exact science and should depend on several factors. First, consider how you want your product or service to be perceived in the market. If your differentiator is to be the lowest price, position your company as the “discount” option. Think Walmart, and price your products lower than the competition.

If, on the other hand, you want to be the Mercedes of the market, then you’ll position your product as the luxury option. Of course you’ll have to back this up with superior quality, but being the luxury option allows you to command higher prices.

You can, of course, fall somewhere in the middle, but the point is that pricing is a matter of perception. How you position your product in the market compared to the competition is a big factor in determining your price.

Of course, you’ll have to consider your costs, as well as competitor prices. Obviously, your prices must cover your costs and allow you to make a good profit margin.

Whatever pricing strategy you choose, you’ll justify it in this section of your plan.

6. Operations and Management

This section is the real nuts and bolts of your business – how it operates on a day-to-day basis and who is operating it. Again, this section should be divided into subsections.

Operational plan

Your plan of operations should be specific , detailed and mainly logistical. Who will be doing what on a daily, weekly, and monthly basis? How will the business be managed and how will quality be assured? Be sure to detail your suppliers and how and when you’ll order raw materials.

This should also include the roles that will be filled and the various processes that will be part of everyday business operations . Just consider all the critical functions that must be handled for your business to be able to operate on an ongoing basis.

Technology plan

If your product involves technical development, you’ll describe your tech development plan with specific goals and milestones. The plan will also include how many people will be working on this development, and what needs to be done for goals to be met.

If your company is not a technology company, you’ll describe what technologies you plan to use to run your business or make your business more efficient. It could be process automation software, payroll software, or just laptops and tablets for your staff.

Management and organizational structure

Now you’ll describe who’s running the show. It may be just you when you’re starting out, so you’ll detail what your role will be and summarize your background. You’ll also go into detail about any managers that you plan to hire and when that will occur.

Essentially, you’re explaining your management structure and detailing why your strategy will enable smooth and efficient operations.

Ideally, at some point, you’ll have an organizational structure that is a hierarchy of your staff. Describe what you envision your organizational structure to be.

Personnel plan

Detail who you’ve hired or plan to hire and for which roles. For example, you might have a developer, two sales people, and one customer service representative.

Describe each role and what qualifications are needed to perform those roles.

7. Financial Plan

Now, you’ll enter the dreaded world of finance. Many entrepreneurs struggle with this part, so you might want to engage a financial professional to help you. A financial plan has five key elements.

Startup Costs

Detail in a spreadsheet every cost you’ll incur before you open your doors. This should determine how much capital you’ll need to launch your business.

Financial projections

Creating financial projections, like many facets of business, is not an exact science. If your company has no history, financial projections can only be an educated guess.

First, come up with realistic sales projections. How much do you expect to sell each month? Lay out at least three years of sales projections, detailing monthly sales growth for the first year, then annually thereafter.

Calculate your monthly costs, keeping in mind that some costs will grow along with sales.

Once you have your numbers projected and calculated, use them to create these three key financial statements:

Profit and Loss Statement , also known as an income statement. This shows projected revenue and lists all costs, which are then deducted to show net profit or loss.
Cash Flow Statement. This shows how much cash you have on hand at any given time. It will have a starting balance, projections of cash coming in, and cash going out, which will be used to calculate cash on hand at the end of the reporting period.
Balance Sheet. This shows the net worth of the business, which is the assets of the business minus debts. Assets include equipment, cash, accounts receivables, inventory, and more. Debts include outstanding loan balances and accounts payable.

You’ll need monthly projected versions of each statement for the first year, then annual projections for the following two years.

Break-even analysis

The break-even point for your business is when costs and revenue are equal. Most startups operate at a loss for a period of time before they break even and start to make a profit. Your break-even analysis will project when your break-even point will occur, and will be informed by your profit and loss statement.

Funding requirements and sources

Lay out the funding you’ll need, when, and where you’ll get it. You’ll also explain what those funds will be used for at various points. If you’re in a high growth industry that can attract investors, you’ll likely need various rounds of funding to launch and grow.

Key performance indicators (KPIs)

KPIs measure your company’s performance and can determine success. Many entrepreneurs only focus on the bottom line, but measuring specific KPIs helps find areas of improvement. Every business has certain crucial metrics.

If you sell only online, one of your key metrics might be your visitor conversion rate. You might do an analysis to learn why just one out of ten site visitors makes a purchase.

Perhaps the purchase process is too complicated or your product descriptions are vague. The point is, learning why your conversion rate is low gives you a chance to improve it and boost sales.

8. Appendices

In the appendices, you can attach documents such as manager resumes or any other documents that support your business plan.

As you can see, a business plan has many components, so it’s not an afternoon project. It will likely take you several weeks and a great deal of work to complete. Unless you’re a finance guru, you may also want some help from a financial professional.

Keep in mind that for a small business owner, there may be no better learning experience than writing a detailed and compelling business plan. It shouldn’t be viewed as a hassle, but as an opportunity!

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Everything You Need to Know About Writing a Comprehensive Business Plan

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Crafting a comprehensive business plan is not just a formality; it’s a roadmap to your venture’s success. From securing funding to navigating market challenges, a well-structured business plan encompasses essential elements like financial projections , market analysis , and organizational structure , ensuring you’re prepared for every twist and turn on your entrepreneurial journey.

What is a business plan and why is it important?

Definition of a business plan and its key components.

A business plan is a formal document that outlines a company's goals, the strategy for achieving them, and the resources required for success. It serves as a roadmap for the business and includes several critical components:

Executive Summary
Market Analysis
Organizational Structure
Financial Projections
Funding Requirements

Each of these business plan components plays a vital role in guiding the company's direction and ensuring that all stakeholders are aligned with the business's vision.

Overview of the role a business plan plays in securing funding

One of the primary purposes of writing a business plan is to secure funding. Investors and financial institutions typically require a comprehensive business plan to evaluate the viability of a business before committing their resources. A well-prepared business plan demonstrates:

Clear understanding of the market and competitive landscape.
Realistic financial projections, including anticipated revenue and expenses.
Strategic planning that showcases how the business intends to achieve its goals.

By presenting a solid business plan, entrepreneurs can effectively communicate their vision and convince potential investors of the importance of business plans in mitigating risks and maximizing returns.

Explanation of how a business plan helps in strategic planning and operational guidance

A comprehensive business plan is not just a tool for securing funding; it also serves as a crucial guide for strategic planning and operational management. Here’s how:

Strategic Planning: A business plan helps identify long-term goals and the strategies needed to achieve them. It acts as a reference point for assessing progress and making informed decisions.
Operational Guidance: Detailed sections on organizational structure and operational procedures provide clarity on roles and responsibilities, helping to streamline business operations.
Performance Metrics: By establishing performance benchmarks, a business plan allows businesses to track their success and make necessary adjustments in response to market changes.

Ultimately, a well-crafted business plan is an essential document that not only facilitates funding but also lays the groundwork for a business's long-term success.

Regularly update your business plan to reflect changes in market conditions or business objectives.
Ensure that your financial projections are based on realistic assumptions to avoid common mistakes in business plans.

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What are the essential elements of a comprehensive business plan?

Description of the executive summary and its significance.

The executive summary serves as the gateway to your comprehensive business plan. It provides a concise overview of your business, including your objectives, strategy, and the unique selling proposition that sets you apart from competitors. This section is crucial because it is often the first part that potential investors or stakeholders read; therefore, it must be compelling and informative. A well-crafted executive summary can determine whether readers will delve deeper into your entire business plan or move on.

Breakdown of the market analysis and competitive landscape

Conducting a thorough market analysis for your business plan is essential for demonstrating an understanding of your industry and identifying opportunities for growth. This section should include:

An overview of the target market, including demographics and customer needs.
Analysis of industry trends that could impact your business.
A detailed examination of competitors, utilizing competitor analysis techniques to highlight their strengths and weaknesses.

By showcasing your awareness of the market landscape, you can better position your business strategy and convince potential investors of your viability.

Importance of financial projections and funding requirements

In any comprehensive business plan , financial projections are pivotal. This section should include:

Revenue projections based on realistic assumptions.
Estimated expenses, including both fixed and variable costs.
A break-even analysis to illustrate when your business will become profitable.
Details about investment requirements and how funds will be allocated.

Providing detailed financial projections not only demonstrates the potential for return on investment but also shows that you have a solid grasp of your business's financial landscape.

Discussion on the organizational structure and management team

The organizational structure of your business is a vital component of your business plan. This section should outline the hierarchy, roles, and responsibilities within the company. A strong management team is often a key factor for investors; therefore, it is essential to highlight:

The backgrounds and experiences of key team members.
Their relevant skills that contribute to the business's success.
The overall structure, whether it is flat or hierarchical, and how it supports operational efficiency.

By clearly defining the organizational structure and showcasing the expertise of your management team, you establish credibility and confidence in your business’s ability to execute its strategy.

Ensure your executive summary encapsulates all critical aspects of your business plan clearly and succinctly.
Utilize charts and graphs in your market analysis to visually represent data and trends.
Be conservative in your financial projections to avoid the pitfalls of unrealistic expectations.
Highlight diverse skill sets within your management team to showcase a well-rounded approach to leadership.

How do you conduct market research for your business plan?

Types of market research techniques to consider.

Conducting market research for your business plan is critical to understanding the landscape in which you will operate. There are two primary types of market research techniques:

Primary Research: This involves gathering firsthand data through methods such as surveys, interviews, and focus groups. This approach allows you to obtain specific insights directly from potential customers or industry experts.
Secondary Research: This includes analyzing existing data from reports, studies, and articles. Sources can range from government publications to market research firms, providing valuable context and background information about the industry.

Identifying target audience and customer demographics

Understanding your target audience is a cornerstone of your market analysis for the business plan. To identify your target audience, consider the following:

Demographics: Gather data on age, gender, income level, education, and occupation to define who your customers are.
Psychographics: Explore the interests, lifestyles, values, and purchasing behavior of your potential customers to understand their motivations.
Geographics: Determine the locations where your target audience resides, as geographic trends can significantly affect purchasing decisions.

Utilizing target audience research will not only aid in tailoring your business offerings but also in creating effective marketing strategies that resonate with your potential customers.

Analyzing industry trends and competitors’ strengths and weaknesses

Incorporating an analysis of industry trends and competitors into your business plan is essential for developing a robust business strategy. Here’s how to approach this:

Industry Trends: Research current trends that may impact your business. Look for data regarding technological advancements, regulatory changes, and shifts in consumer preferences.
Competitor Analysis: Identify your main competitors and evaluate their strengths and weaknesses. Consider factors such as product offerings, pricing strategies, market share, and customer loyalty. This will help you identify gaps in the market and areas where you can differentiate your business.

Utilizing competitor analysis techniques will enhance your understanding of the competitive landscape and inform your operational guidance business plan, ensuring you are well-prepared to address market challenges.

Use online tools like Google Trends and social media analytics to gather data on industry trends and customer preferences.
Consider conducting surveys or focus groups to get direct feedback from your target audience about their needs and expectations.
Regularly revisit your market research as conditions change; staying informed can give your business a crucial edge.

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4 What financial data should be included in a business plan?

Overview of revenue projections and expense estimates.

When writing a comprehensive business plan, it's critical to provide a detailed overview of your revenue projections and expense estimates. These financial projections in your business plan serve as a roadmap for your anticipated financial performance over the next several years. It is essential to base these projections on realistic assumptions and thorough market analysis for business plan accuracy.

Revenue projections should include:

Projected sales volume and pricing strategy.
Expected revenue streams from different products or services.
Seasonal fluctuations that may impact sales.

Expense estimates should cover:

Fixed costs, such as rent and salaries.
Variable costs, including inventory and materials.
Marketing and operational expenses necessary for running the business.

Explanation of break-even analysis and cash flow statements

Another essential component of your financial data is the break-even analysis, which helps identify the point at which your business will be able to cover its costs. This analysis is vital for understanding the viability of your business strategy plan. A well-structured break-even analysis will break down fixed and variable costs and provide insights into how many units need to be sold to cover those costs.

Additionally, a cash flow statement is crucial as it details the inflows and outflows of cash within your business over a specific period. This statement allows you to:

Monitor liquidity and ensure that your business can meet its obligations.
Identify periods of cash surplus and deficit.
Make informed decisions regarding investments and expenses.

Importance of including funding sources and investment requirements

In any business plan, especially one aimed at attracting investors, it is vital to clearly outline your funding sources and investment requirements. This section should detail:

The total amount of funding needed to launch and sustain the business.
Potential sources of funding, such as loans, investors, or personal savings.
How the funds will be allocated across various aspects of the business.

Providing this information not only demonstrates your understanding of the financial landscape but also builds credibility with potential investors. It shows that you have a clear plan for utilizing their investment effectively to ensure business growth.

Be conservative in your revenue projections to avoid unrealistic expectations.
Regularly update your financial data as your business evolves and market conditions change.
Engage with a financial advisor for expert insights on cash flow management and funding strategies.

How can you effectively present your business plan?

Key elements of a professional presentation format.

When presenting a business plan, the format and structure are vital for clarity and professionalism. The presentation should be well-organized, typically following the layout of the business plan itself. Essential elements include:

Executive Summary: Begin with a concise overview that highlights the business's mission, vision, and key objectives.
Market Analysis: Present findings from your market analysis for the business plan , showcasing the target market, customer demographics, and industry trends.
Financial Projections: Clearly outline your financial projections in the business plan , including revenue forecasts, break-even analysis, and funding requirements.
Conclusion: Summarize the key points and emphasize the potential for success and growth.

Tips for creating engaging visual aids and supporting documents

Visual aids can significantly enhance your business plan presentation. Here are some tips for creating engaging materials:

Use Graphs and Charts: Incorporate graphs to visualize financial projections, market analysis, and growth trends. This makes complex data more digestible.
Consistent Branding: Ensure that all slides and materials reflect your business's branding, including logos, colors, and fonts.
Bullet Points: Use concise bullet points to summarize key information, avoiding dense paragraphs that may overwhelm the audience.
Infographics: Create infographics to illustrate processes or comparisons, making information visually appealing and easier to understand.
Practice your presentation multiple times to ensure clarity and confidence.
Seek feedback on your visual aids from peers to ensure they effectively communicate your message.

Strategies for tailoring the presentation to different audiences

Different stakeholders may have varying interests and priorities. Tailoring your presentation accordingly can enhance its impact:

Investors: Focus on financial projections, funding requirements, and return on investment. Highlight how their investment will contribute to growth.
Partners: Emphasize collaboration opportunities, operational synergies, and shared goals to foster mutual interest.
Employees: Discuss the company's vision and mission, outlining how their roles contribute to the overall success.
Advisors: Seek their insights on market trends and business strategies, framing the presentation as a collaborative discussion.
Research your audience beforehand to understand their priorities and concerns.
Adjust your language and terminology to match the level of expertise of your audience, ensuring accessibility.

What common mistakes should be avoided when writing a business plan?

Pitfalls of unrealistic financial projections.

One of the most critical aspects of a comprehensive business plan is the financial projections. However, many entrepreneurs make the mistake of presenting overly optimistic revenue projections that do not reflect realistic market conditions. This not only undermines the credibility of the business plan but can also lead to significant issues down the line.

When writing a business plan, it is essential to base financial projections on sound research and realistic assumptions. Consider the following:

Use historical data where available to inform your revenue projections.
Factor in economic conditions and market trends that could affect your business.
Be cautious about assuming rapid growth; a more gradual increase may be more realistic.

By avoiding unrealistic financial projections, you can enhance the overall integrity of your business plan, making it more appealing to potential investors.

Importance of avoiding vague language and unclear objectives

Another common mistake in writing a business plan is the use of vague language, which can lead to confusion about the business's goals and objectives. Clear and precise language is crucial in communicating your vision and strategy effectively.

To ensure clarity, consider these tips:

Define specific, measurable goals rather than broad statements.
Use concrete examples to illustrate your points, especially in the executive summary business plan.
Avoid jargon and technical terms that may not be familiar to all readers.
Regularly review and refine your objectives to ensure they remain clear and actionable.

Clear objectives not only help you stay on track but also make it easier for investors and stakeholders to understand your business strategy plan.

Consequences of neglecting market research and competitor analysis

Conducting thorough market research is a pivotal component of writing a business plan. Neglecting this vital step can lead to misguided strategies and missed opportunities. A comprehensive market analysis for a business plan should include an understanding of your target audience and the competitive landscape.

Some consequences of inadequate market research include:

Inability to identify key market trends that could impact your business.
Failure to recognize competitors’ strengths and weaknesses, leaving you unprepared to differentiate your offerings.
Missing out on potential customer demographics and insights that could inform product development.

Utilizing effective competitor analysis techniques and ensuring you have a deep understanding of your target market will bolster the quality of your business plan, aligning it more closely with actual market conditions.

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7 How can you revise and update your business plan over time?

Importance of regularly reviewing goals and performance metrics.

Regularly reviewing your goals and performance metrics is essential for ensuring that your comprehensive business plan remains relevant and effective. As your business evolves, so too should your strategic approach. This can involve:

Assessing whether your initial objectives are being met.
Identifying any shifts in the market that may affect your goals.
Evaluating the effectiveness of your strategies against actual performance data.

By implementing a system for continuous evaluation, you can better align your operations with your long-term vision while adapting to any unforeseen challenges.

Strategies for incorporating feedback from stakeholders

Feedback from stakeholders—be it team members, investors, or customers—provides invaluable insight into the effectiveness of your business plan components . Here are some strategies to effectively incorporate such feedback:

Conduct regular meetings with team members to discuss progress and gather input.
Utilize surveys or feedback forms to understand customer perspectives on your offerings.
Engage with investors to understand their expectations and concerns, allowing you to adjust your financial projections in the business plan accordingly.

By actively seeking and valuing stakeholder feedback, you can create a more resilient business strategy that resonates with the needs of your audience.

Discussion on adapting to changes in the market or business environment

The business landscape is dynamic, influenced by factors such as technological advancements, economic shifts, and emerging competitors. To ensure your business plan remains effective, consider the following:

Stay informed about industry trends through continuous market analysis for business plans.
Be prepared to pivot your strategy based on competitor analysis techniques that highlight market gaps.
Regularly update your financial projections to reflect current economic circumstances and business performance.

By maintaining flexibility in your approach, you can not only respond to changes but also leverage them to your advantage, ensuring the longevity and success of your business.

Set a specific schedule for reviewing your business plan, such as quarterly or bi-annually.
Document all feedback and changes to track the evolution of your business strategy.
Encourage an open culture where team members feel comfortable sharing their insights.

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A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

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Business Plan Example and Template

Learn how to create a business plan

What is a Business Plan?

A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing .

Business Plan - Document with the words Business Plan on the title

A business plan should follow a standard format and contain all the important business plan elements. Typically, it should present whatever information an investor or financial institution expects to see before providing financing to a business.

Contents of a Business Plan

A business plan should be structured in a way that it contains all the important information that investors are looking for. Here are the main sections of a business plan:

1. Title Page

The title page captures the legal information of the business, which includes the registered business name, physical address, phone number, email address, date, and the company logo.

2. Executive Summary

The executive summary is the most important section because it is the first section that investors and bankers see when they open the business plan. It provides a summary of the entire business plan. It should be written last to ensure that you don’t leave any details out. It must be short and to the point, and it should capture the reader’s attention. The executive summary should not exceed two pages.

3. Industry Overview

The industry overview section provides information about the specific industry that the business operates in. Some of the information provided in this section includes major competitors, industry trends, and estimated revenues. It also shows the company’s position in the industry and how it will compete in the market against other major players.

4. Market Analysis and Competition

The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model.

Market analysis includes information about the target market’s demographics , geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.

A business can choose to consolidate the market analysis and competition analysis into one section or present them as two separate sections.

5. Sales and Marketing Plan

The sales and marketing plan details how the company plans to sell its products to the target market. It attempts to present the business’s unique selling proposition and the channels it will use to sell its goods and services. It details the company’s advertising and promotion activities, pricing strategy, sales and distribution methods, and after-sales support.

6. Management Plan

The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees.

Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.

7. Operating Plan

The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory . For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.

8. Financial Plan

The financial plan is an important section that will often determine whether the business will obtain required financing from financial institutions, investors, or venture capitalists. It should demonstrate that the proposed business is viable and will return enough revenues to be able to meet its financial obligations. Some of the information contained in the financial plan includes a projected income statement , balance sheet, and cash flow.

9. Appendices and Exhibits

The appendices and exhibits part is the last section of a business plan. It includes any additional information that banks and investors may be interested in or that adds credibility to the business. Some of the information that may be included in the appendices section includes office/building plans, detailed market research , products/services offering information, marketing brochures, and credit histories of the promoters.

Business Plan Template

Here is a basic template that any business can use when developing its business plan:

Section 1: Executive Summary

Present the company’s mission.
Describe the company’s product and/or service offerings.
Give a summary of the target market and its demographics.
Summarize the industry competition and how the company will capture a share of the available market.
Give a summary of the operational plan, such as inventory, office and labor, and equipment requirements.

Section 2: Industry Overview

Describe the company’s position in the industry.
Describe the existing competition and the major players in the industry.
Provide information about the industry that the business will operate in, estimated revenues, industry trends, government influences, as well as the demographics of the target market.

Section 3: Market Analysis and Competition

Define your target market, their needs, and their geographical location.
Describe the size of the market, the units of the company’s products that potential customers may buy, and the market changes that may occur due to overall economic changes.
Give an overview of the estimated sales volume vis-à-vis what competitors sell.
Give a plan on how the company plans to combat the existing competition to gain and retain market share.

Section 4: Sales and Marketing Plan

Describe the products that the company will offer for sale and its unique selling proposition.
List the different advertising platforms that the business will use to get its message to customers.
Describe how the business plans to price its products in a way that allows it to make a profit.
Give details on how the company’s products will be distributed to the target market and the shipping method.

Section 5: Management Plan

Describe the organizational structure of the company.
List the owners of the company and their ownership percentages.
List the key executives, their roles, and remuneration.
List any internal and external professionals that the company plans to hire, and how they will be compensated.
Include a list of the members of the advisory board, if available.

Section 6: Operating Plan

Describe the location of the business, including office and warehouse requirements.
Describe the labor requirement of the company. Outline the number of staff that the company needs, their roles, skills training needed, and employee tenures (full-time or part-time).
Describe the manufacturing process, and the time it will take to produce one unit of a product.
Describe the equipment and machinery requirements, and if the company will lease or purchase equipment and machinery, and the related costs that the company estimates it will incur.
Provide a list of raw material requirements, how they will be sourced, and the main suppliers that will supply the required inputs.

Section 7: Financial Plan

Describe the financial projections of the company, by including the projected income statement, projected cash flow statement, and the balance sheet projection.

Section 8: Appendices and Exhibits

Quotes of building and machinery leases
Proposed office and warehouse plan
Market research and a summary of the target market
Credit information of the owners
List of product and/or services

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The 12 Key Components of a Business Plan

There are 12 components of a business plan entrepreneurs must know as they lay out how their business will work.

image of empty containers on a page representing components of a business plan

Entrepreneurs who create business plans are more likely to succeed than those who don’t.

Not only can a sound plan help your business access investment capital but—as the study found—it can even determine the success or failure of your venture.

Here are the critical components of a business plan to help you craft your own.

What is a business plan?

A business plan is a document outlining your business goals and your strategies for achieving them. It might include your company’s mission statement , details about your products or services, how you plan to bring them to market, and how much time and money you need to execute the plan.

For a thorough explanation of how to write a business plan, refer to Shopify’s guide .

A woman is meeting a business contact to share ideas in a casual environment.

12 key components of a business plan

Business plans vary depending on the product or service. Some entrepreneurs choose to use diagrams and charts, while others rely on text alone. Regardless of how you go about it, good business plans tend to include the following elements:

Executive summary
Company description
Market analysis
Marketing plan
Competitive analysis
Organizational structure
Products and services
Operating plan
Financial plan
Funding sources

1. Executive summary

The executive summary briefly explains your business’s products or services and why it has the potential to be profitable. You may also include basic information about your company, such as its location and the number of employees.

2. Company description

The company description helps customers, lenders, and potential investors gain a deeper understanding of your product or service. It provides detailed descriptions of your supply chains and explains how your company plans to bring its products or services to market.

3. Market analysis

The market analysis section outlines your plans to reach your target audience . It usually includes an estimate of the potential demand for the product or service and a summary of market research .

The market analysis also includes information about marketing strategies, advertising ideas, or other ways of attracting customers.

Another component of this section is a detailed breakdown of target customers. Many businesses find it helpful to analyze their target market using customer segments , often with demographic data such as age or income. This way, you can customize your marketing plans to reach different groups of customers.

4. Marketing plan

The marketing plan section details how you plan to attract and retain customers. It covers the marketing mix: product, price, place, and promotion. It shows you understand your market and have clear, measurable goals to guide your marketing strategy.

For example, a fashion retail store might focus on online sales channels, competitive pricing strategies, high-quality products, and aggressive social media promotion.

5. Sales plan

This section focuses on the actions you’ll take to achieve sales targets and drive revenue. It’s different from a marketing plan because it’s more about the direct process of selling the product to your customer. It looks at the methods used from lead generation to closing the sale, as well as revenue targets.

An ecommerce sales strategy might involve optimizing your online shopping experience, using targeted digital marketing to drive traffic, and employing tactics like flash sales , personalized email marketing, or loyalty programs to boost sales.

6. Competitive analysis

It’s essential that you understand your competitors and distinguish your business. There are two main types of competitors: direct and indirect competitors.

Direct competitors. Direct competitors offer the same or similar products and services. For example, the underwear brand Skims is a direct competitor with Spanx .
Indirect competitors. Indirect competitors, on the other hand, offer different products and services that may satisfy the same customer needs. For example, cable television is an indirect competitor to Netflix.

A competitive analysis explains your business’s unique strengths that give it a competitive advantage over other businesses.

7. Organizational structure

The organizational structure explains your company’s legal structure and provides information about the management team. It also describes the business’s operating plan and details who is responsible for which aspects of the company.

8. Products and services

This component goes in-depth on what you’re actually selling and why it’s valuable to customers. It’ll provide a description of your products and services with all their features, benefits, and unique selling points. It may also discuss the current development stage of your products and plans for the future.

The products and services section also looks at pricing strategy , intellectual property (IP) rights, and any key supplier information. For example, in an ecommerce business plan focusing on eco-friendly home products, this section would detail the range of products, explain how they are environmentally friendly, outline sourcing and production practices, discuss pricing, and highlight any certifications or eco-labels the products have received.

9. Operating plan

Here is where you explain the day-to-day operations of the business. Your operating plan will cover aspects from production or service delivery to human and resource management. It shows readers how you plan to deliver on your promises.

For example, in a business plan for a startup selling artisanal crafts, this section would include details on how artisans are sourced, how products are cataloged and stored, the ecommerce platform used for sales, and the logistics for packaging and shipping orders worldwide.

10. Financial plan

The financial plan is one of the most critical parts of the business plan, especially for companies seeking outside funding.

A plan often includes capital expenditure budgets, forecasted income statements , and cash flow statements , which can help predict when your company will become profitable and how it expects to survive in the meantime.

If your business is already profitable, your financial plan can help with convincing investors of future growth. At the end of the financial section, you may also include a value proposition , which estimates the value of your business.

11. Funding sources

Some businesses planning to expand or to seek funds from venture capitalists may include a section devoted to their long-term growth strategy, including ways to broaden product offerings and penetrate new markets.

12. Appendix

The final component of a business plan is the appendix. Here, you may include additional documents cited in other sections or requested by readers. These might be résumés, financial statements, product pictures, patent approvals, and legal records.

Components of a business plan FAQ

What are 8 common parts of a good business plan.

Some of the most common components of a business plan are an executive summary, a company description, a marketing analysis, a competitive analysis, an organization description, a summary of growth strategies, a financial plan, and an appendix.

What is a business plan format?

A business plan format is a way of structuring a business plan. Shopify offers a free business plan template for startups that you can use to format your business plan.

What are the 5 functions of a business plan?

A business plan explains your company’s products or services, how you expect to make money, the reliability of supply chains, and factors that might affect demand.

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How to Write a Business Plan: Target Market Analysis

The Business Plan and the Importance of Defining Your Target Market

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Conducting a Market Analysis

Polling your target market, writing the market analysis, online tools for market research, u.s. online market research sources, canadian online market research, local sources of market research, doing your own market research.

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The market analysis is basically the target market section of your business plan . It is a thorough examination of the ideal people to whom you intend to sell your products or services.

Even if you intend on selling a product or service only in your community, you won't be selling that service to everyone who lives there. Knowing exactly what type(s) of people might be interested in buying your product or service and how many of them reside in your projected area or region is fundamental in creating your market analysis.

Once target market data has been established, you'll also work on sales projections within specific time frames, as well as how prospective sales might be affected by trends and policies.

Research is key and cornerstone of any solid business plan .

Don't Skip This Step!

Don't skip market research; otherwise, you could end up starting a business that doesn't have a paying market.

Use these general terms as linchpins in research data for the market analysis section of your business plan, and to identify your target market:

	What age range are you catering products/services to? Kids? Adults? Seniors? Gen X? Millennials?
	Are you targeting men, women, or both sexes?
	Are your target customers married or single, or divorced?
	What is their family structure (number of children, extended family, etc.)?
	Where do they live? Are you selling locally? Regionally, nationally, or internationally?
	How much education do they have?
	What is their income?
	What do they do for a living?
	Are they members of a particular religious group?
	Are they members of a particular language group?
	What is their lifestyle like?
	What motivates them?
	What is the size of the target market?

But don't stop here. To succinctly define your target market, poll or survey members of your prospective clients or customers to ask specific questions directly related to your products or services. For instance, if you plan to sell computer-related services, ask questions relating to the number of computing devices your prospective customers own and how often they require servicing. If you plan on selling garden furniture and accessories, ask what kinds of garden furniture or accessories your potential customers have bought in the past, how often, and what they expect to buy within the next one, three, and five years.

Answers to these and other questions related to your market are to help you understand your market potential.

The goal of the information you collect is to help you project how much of your product or service you'll be able to sell. Review these important questions you need to try to answer using the data you collect:

What proportion of your target market has used a product similar to yours before?
How much of your product or service might your target market buy? (Estimate this in gross sales and/or in units of product/service sold.)
What proportion of your target market might be repeat customers?
How might your target market be affected by demographic shifts?
How might your target market be affected by economic events (e.g. a local mill closing or a big-box retailer opening locally)?
How might your target market be affected by larger socio-economic trends?
How might your target market be affected by government policies (e.g. new bylaws or changes in taxes)?

One purpose of the market analysis is to ensure you have a viable business idea.

Find Your Buying Market

Use your market research to make sure people don't just like your business idea, but they're also willing to pay for it.

If you have information suggesting that you have a large enough market to sustain your business goals, write the market analysis in the form of several short paragraphs using appropriate headings for each. If you have several target markets, you may want to number each.

Sections of your market analysis should include:

Industry Description and Outlook
Target Market
Market Research Results
Competitive Analysis

Remember to properly cite your sources of information within the body of your market analysis as you write it. You and other readers of your business plan, such as potential investors, will need to know the sources of the statistics or opinions that you've gathered.

There are several online resources to learn if your business idea is something worth pursing, including:

Keyword searches can give you an overall sense of potential demand for your product or service based on the number of searches.
Google Trends analysis can tell you how the number of searches has changed over time.
Social media campaigns can give you an indication of the potential customer interest in your business idea.

The U.S. Small Business Administration (SBA) has information on doing your market research and analysis , as well as a list of free small business data and trends resources you can use to conduct your research. Consider these sources for data collection:

SBA Business Data and Statistics
The U.S. Census Bureau maintains a huge database of demographic information that is searchable by state, county, city/town, or zip code using its census data tool . Community, housing, economic, and population surveys are also available.
The U.S. Department of Commerce Bureau of Economic Analysis (BEA) has extensive statistics on the economy including consumer income/spending/consumption, business activity, GDP, and more, all of which are searchable by location.

The Government of Canada offers a guide on doing market research and tips for understanding the data you collect. Canadian data resources include:

Statistics Canada offers demographic and economic data.
The Business Development Bank of Canada (BDC) offers market research and consulting with industry experts.
The Canada Business Network provides business information to entrepreneurs by province/territory, including market research data.

There are also a great many local resources for building target market information to explore, including:

Local library
Local Chamber of Commerce
Board of Trade
Economic Development Centre
Local government agent's office
Provincial business ministry
Local phone book

All of these will have information helpful in defining your target market and providing insights into trends.

The above resources are secondary sources of information, in which others have collected and compiled the data. To get specific information about your business, consider conducting your own market research . For instance, you might want to design a questionnaire and survey your target market to learn more about their habits and preferences relating to your product or service.

Market research is time-consuming but is an important step in affording your business plan validity. If you don't have the time or the research skills to thoroughly define your target market yourself, hiring a person or firm to do the research for you can be a wise investment.

Small Business Administration. " Market Research and Competitive Analysis. " Accessed Jan. 13, 2020.

Spreadsheets for Business – Using Excel to Help with your Small Business Questions

Business Plan Demographics – Defining a Target Market

Sorting through demographic information is one of the first steps in doing market research and competitive analysis. This is stuff you’ll need to know in order to prepare an effective business plan. Without this information, you, as a founder, don’t know if there is a sufficient market to support your business. You will also be starting off at a disadvantage when planning other aspects of your business.

**Note: this business plan demographics guide was written just before the Census Bureau changed its primary portal for data from the American FactFinder to Data.Census.Gov .

Download a free copy of the workbook used in this post

Complete the form below and click Submit . Upon email confirmation, the workbook will open in a new tab.

Keep in mind that this workbook is only designed to work with table S0201 , Selected Population Profile in the United States . Any other table might not be in the correct format.

About these posts

This series of posts was written to convey my take on how to write a business plan. My intent is to follow up with several more posts after this one.

I’m using the U.S. Small Business Administration (SBA) Plan your business guide as my outline ( link ). In true SpreadsheetsForBusiness.com fashion – I plan to include free downloadable spreadsheets where appropriate.

Rather than just recycling the same information you could find elsewhere, I’m going to take this journey with you. I’ll be building my own business plan as I write these posts. This is my first business plan, so you’ll be learning right along with me.

My business plan

My plan is based around a hypothetical business that will manufacture and market a hair regrowth product for men (and women, I suppose). The plan is to manufacture the product with all-natural ingredients.

What are business plan demographics?

Sorting through demographic data for your business’ potential customers is the first step in understanding what type of person (or business) might be interested in your product or service.

It can provide an unofficial ceiling to the number of customers you might expect. It’s from this information you can get into more detail about demand, market saturation, pricing, and so on.

Common demographic information includes:

Marital status
Employment status
Geographic area

Why worry about business plan demographics?

Focusing on marketing to specific individuals helps you plan with clarity. The saying goes: “you can’t please all the people all the time.” By not trying to market to everyone a little bit, you can focus your efforts on creating a really good experience for some people.

Understanding your target demographics can help you determine if your target market is saturated. Read this post: CALCULATING MARKET SATURATION FOR YOUR BUSINESS PLAN

Whatever your business is, it probably is a reflection of yourself. Your interests and talents, that is. Who you market to will also depend on your characteristics and preferences. So, as you choose the demographics of your avatar, consider who you identify with and would be comfortable marketing to.

How to find and analyze business plan demographics

The market for a product or service is quantified by the number of people who make it up and the total amount of money they spend. We can quantify the size of the market by segmenting people based on their demographic characteristics

Of course, since most of this information is numerical, I’ll be using a spreadsheet to keep track of what I found and what changes in variables mean for the market of my aspiring business.

Also, I’ll be using online resources for the sake of time and simplicity. Theoretically, market research could involve things like focus groups and surveys. That’s more involved than I want to get for this idea, so, I’ll stick with the free information.

The SBA has a nice list of resources for market and competitive analysis here .

Demographic information

Here, we’re just looking for basic information about the people who I might be selling to. For instance, how many people are in the age range that I would market to? How much money do they make? Are they single and looking to mingle? Or, are they in committed relationships and proud of their bald head (like a certain “old man” I used to know and miss very much)?

From FactFinder to spreadsheet

First stop is the U.S. Census FactFinder ( link ).

Here, you can find Census data about your state, city, or even zip code. Not every business is going to be nationwide. Some, like a restaurant, will be very local.

Also, if your business will market to other businesses (B2B), then the information contained here may or may not be pertinent to you. Try another part of the Census website called the Small Business Edition ( link ) if you’re not finding what you need.

Interested in mining the Census website for more valuable market research? Read this post: CENSUS DATA MARKET RESEARCH AT THE NEW DATA.CENSUS.GOV

Since, as of now, I envision my business being nationwide (at the very least regional), I chose to use the “Guided Search.” From there, in the “Topics” section, I chose to look at information pertaining to age, sex, age group, income/earnings (households), and marital status.

I can always delve into more detail or retrieve different information at a later time. My hope is that this gets me started.

business plan demographic analysis census search

Additionally, on the next screen, I chose to break the information down by region. I included all regions so that I could total them for a view of the entire country.

Finally, on the last screen, I opted to see the one table that outlined this information in 2017, the latest year available.

Don’t bother with the “Download” Action. It will give you your data in a different format than it is displayed.

Instead, just highlight everything in the FactFinder table and copy + paste it in a spreadsheet.

business plan demographic analysis copy census table

Fixing errors

From there, do a Find and replace in your spreadsheet to get rid of the errors that are a result of a “=” being placed in front of the “+/-.01” in the Margin of error column. Replace the “=” with an apostrophe. Be sure to Also search within formulas .

Filtering for the demographic information I need

My goal here is to get a range of the number of potential customers based on a set of demographic statistics. I have a lot more information than I need, so let’s see if we can widdle this down into something more useable.

To do this, I added some columns to the Demographic Info worksheet.

First of all, I added a column ( Estimate # ) that aimed to translate some of the percentage population information into quantities. The format of every download from FactFinder isn’t going to be the same. But, an attempt was made to give you access to both percentage and quantity information for each line item.

Additionally, you’ll find a column named Enter 1-10 to rank demographics . Here, you’ll be able to rank demographic information and narrow down your market on the Pick Demographics worksheet.

Want to nail down the size of your market before you move forward? Read this post: MARKET SIZE FOR A BUSINESS PLAN – 2 METHODS TO GAUGE IT

Creating customer avatars

Maybe you have a couple of different mixes of demographics in mind. That’s fine. Once you are satisfied with one mix of demographics you can highlight the information on the Pick Demographics worksheet, then copy and paste the values (Ctrl + Shift +V) into one of the boxes on the Customer Avatars worksheet.

This allows you to keep tabs on several different customer profiles as you move forward with your business plan.

Keep in mind, this is just the first step of the business plan. The whole point of a plan such as this is to be proactive. In order to be proactive, you’re going to have to be flexible.

If, as you move along through the steps, you reconsider your target demographic – that’s fine. Just circle back and refine your avatars and make adjustments to other parts of the plan as necessary. Don’t get discouraged if you have to do this. That is the whole point of this exercise.

For my avatars, I created four, relatively similar mixes of demographic characteristics.

Gender and income

All include males. Though females can also suffer from hair loss, I am assuming that males would be the primary customer and who the majority of marketing would be geared toward.

Next, every mix of demographics included individuals with earnings as opposed to those with retirement income , with Social Security income , or any other type of public assistance.

Right now, I anticipate that this product would be sold at a premium price due to its uniqueness and all-natural ingredients. This would mean that customers would likely need to earn above-median incomes in order to be in a position to buy a product such as this. Assumptions such as this might change as I progress through this business plan.

In three out of my four avatars, I made assumptions about the relationship status of these men. The demographics included were Now married, except separated , Never married , and Separated . These were my three main avatars.

The fourth included Males , With earnings , and who were High school graduates . This is my “catch-all” avatar. The real total addressable market for my product is probably between this population and the total of the three mentioned above.

The main difference between the three main avatars had to do with education. I assumed that men who were single might be more likely than married men to purchase a product such as this, I lowered the EDUCATION ATTAINMENT to Some college or associate’s degree .

Defining a target market with business plan demographics

Be sure to download your own copy of the workbook used in this post. Just fill out the form at the top.

What other sources would you use to find demographic information for your business plan?

How about the avatars? How would you have screened them further?

Join the conversation on Twitter!

11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

Describe the different purposes of a business plan
Describe and develop the components of a brief business plan
Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Section	Description
Company summary	Brief overview (one to two paragraphs) of the problem, solution, and potential customers
Customer analysis	Description of potential customers and evidence they would purchase product
Market analysis	Size of market, target market, and share of market
Product or service	Current state of product in development and evidence it is feasible
Intellectual property	If applicable, information on patents, licenses, or other IP items
Competitive differentiation	Describe the competition and your competitive advantage
Company founders, management team, and/or advisor	Bios of key people showcasing their expertise and relevant experience
Financials	Projections of revenue, profit, and cash flow for three to five years
Amount of investment	Funding request and how funds will be used

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Executive Summary Component	Content
The Concept	La Vida Lola is a food truck serving the best Latin American and Caribbean cuisine in the Atlanta region, particularly Puerto Rican and Cuban dishes, with a festive flair. La Vida Lola offers freshly prepared dishes from the mobile kitchen of the founding chef and namesake Lola González, a Duluth, Georgia, native who has returned home to launch her first venture after working under some of the world’s top chefs. La Vida Lola will cater to festivals, parks, offices, community and sporting events, and breweries throughout the region.
Market Advantage	Latin food packed with flavor and flair is the main attraction of La Vida Lola. Flavors steeped in Latin American and Caribbean culture can be enjoyed from a menu featuring street foods, sandwiches, and authentic dishes from the González family’s Puerto Rican and Cuban roots. craving ethnic food experiences and are the primary customers, but anyone with a taste for delicious homemade meals in Atlanta can order. Having a native Atlanta-area resident returning to her hometown after working in restaurants around the world to share food with area communities offers a competitive advantage for La Vida Lola in the form of founding chef Lola González.
Marketing	The venture will adopt a concentrated marketing strategy. The company’s promotion mix will comprise a mix of advertising, sales promotion, public relations, and personal selling. Much of the promotion mix will center around dual-language social media.
Venture Team	The two founding members of the management team have almost four decades of combined experience in the restaurant and hospitality industries. Their background includes experience in food and beverage, hospitality and tourism, accounting, finance, and business creation.
Capital Requirements	La Vida Lola is seeking startup capital of $50,000 to establish its food truck in the Atlanta area. An additional $20,000 will be raised through a donations-driven crowdfunding campaign. The venture can be up and running within six months to a year.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Business Description	La Vida Lola will operate in the mobile food services industry, which is identified by SIC code 5812 Eating Places and NAICS code 722330 Mobile Food Services, which consist of establishments primarily engaged in preparing and serving meals and snacks for immediate consumption from motorized vehicles or nonmotorized carts. Ethnically inspired to serve a consumer base that craves more spiced Latin foods, La Vida Lola is an Atlanta-area food truck specializing in Latin cuisine, particularly Puerto Rican and Cuban dishes native to the roots of the founding chef and namesake, Lola González. La Vida Lola aims to spread a passion for Latin cuisine within local communities through flavorful food freshly prepared in a region that has embraced international eats. Through its mobile food kitchen, La Vida Lola plans to roll into parks, festivals, office buildings, breweries, and sporting and community events throughout the greater Atlanta metropolitan region. Future growth possibilities lie in expanding the number of food trucks, integrating food delivery on demand, and adding a food stall at an area food market. After working in noted restaurants for a decade, most recently under the famed chef José Andrés, chef Lola González returned to her hometown of Duluth, Georgia, to start her own venture. Although classically trained by top world chefs, it was González’s grandparents’ cooking of authentic Puerto Rican and Cuban dishes in their kitchen that influenced her profoundly. The freshest ingredients from the local market, the island spices, and her attention to detail were the spark that ignited Lola’s passion for cooking. To that end, she brings flavors steeped in Latin American and Caribbean culture to a flavorful menu packed full of street foods, sandwiches, and authentic dishes. Through reasonably priced menu items, La Vida Lola offers food that appeals to a wide range of customers, from millennial foodies to Latin natives and other locals with Latin roots.

Business Description

La Vida Lola will operate in the mobile food services industry, which is identified by SIC code 5812 Eating Places and NAICS code 722330 Mobile Food Services, which consist of establishments primarily engaged in preparing and serving meals and snacks for immediate consumption from motorized vehicles or nonmotorized carts.

Ethnically inspired to serve a consumer base that craves more spiced Latin foods, La Vida Lola is an Atlanta-area food truck specializing in Latin cuisine, particularly Puerto Rican and Cuban dishes native to the roots of the founding chef and namesake, Lola González.

La Vida Lola aims to spread a passion for Latin cuisine within local communities through flavorful food freshly prepared in a region that has embraced international eats. Through its mobile food kitchen, La Vida Lola plans to roll into parks, festivals, office buildings, breweries, and sporting and community events throughout the greater Atlanta metropolitan region. Future growth possibilities lie in expanding the number of food trucks, integrating food delivery on demand, and adding a food stall at an area food market.

After working in noted restaurants for a decade, most recently under the famed chef José Andrés, chef Lola González returned to her hometown of Duluth, Georgia, to start her own venture. Although classically trained by top world chefs, it was González’s grandparents’ cooking of authentic Puerto Rican and Cuban dishes in their kitchen that influenced her profoundly.

The freshest ingredients from the local market, the island spices, and her attention to detail were the spark that ignited Lola’s passion for cooking. To that end, she brings flavors steeped in Latin American and Caribbean culture to a flavorful menu packed full of street foods, sandwiches, and authentic dishes. Through reasonably priced menu items, La Vida Lola offers food that appeals to a wide range of customers, from millennial foodies to Latin natives and other locals with Latin roots.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Industry Analysis and Market Strategy	According to ’ first annual report from the San Francisco-based Off The Grid, a company that facilitates food markets nationwide, the US food truck industry alone is projected to grow by nearly 20 percent from $800 million in 2017 to $985 million in 2019. Meanwhile, an report shows the street vendors’ industry with a 4.2 percent annual growth rate to reach $3.2 billion in 2018. Food truck and street food vendors are increasingly investing in specialty, authentic ethnic, and fusion food, according to the report. Although the report projects demand to slow down over the next five years, it notes there are still opportunities for sustained growth in major metropolitan areas. The street vendors industry has been a particular bright spot within the larger food service sector. The industry is in a growth phase of its life cycle. The low overhead cost to set up a new establishment has enabled many individuals, especially specialty chefs looking to start their own businesses, to own a food truck in lieu of opening an entire restaurant. Off the Grid’s annual report indicates the average typical initial investment ranges from $55,000 to $75,000 to open a mobile food truck. The restaurant industry accounts for $800 billion in sales nationwide, according to data from the National Restaurant Association. Georgia restaurants brought in a total of $19.6 billion in 2017, according to figures from the Georgia Restaurant Association. There are approximately 12,000 restaurants in the metro Atlanta region. The Atlanta region accounts for almost 60 percent of the Georgia restaurant industry. The SAM is estimated to be approximately $360 million. The mobile food/street vendor industry can be segmented by types of customers, types of cuisine (American, desserts, Central and South American, Asian, mixed ethnicity, Greek Mediterranean, seafood), geographic location and types (mobile food stands, mobile refreshment stands, mobile snack stands, street vendors of food, mobile food concession stands). Secondary competing industries include chain restaurants, single location full-service restaurants, food service contractors, caterers, fast food restaurants, and coffee and snack shops. The top food truck competitors according to the , the daily newspaper in La Vida Lola’s market, are Bento Bus, Mix’d Up Burgers, Mac the Cheese, The Fry Guy, and The Blaxican. Bento Bus positions itself as a Japanese-inspired food truck using organic ingredients and dispensing in eco-friendly ware. The Blaxican positions itself as serving what it dubs “Mexican soul food,” a fusion mashup of Mexican food with Southern comfort food. After years of operating a food truck, The Blaxican also recently opened its first brick-and-mortar restaurant. The Fry Guy specializes in Belgian-style street fries with a variety of homemade dipping sauces. These three food trucks would be the primary competition to La Vida Lola, since they are in the “ethnic food” space, while the other two offer traditional American food. All five have established brand identities and loyal followers/customers since they are among the industry leaders as established by “best of” lists from area publications like the . Most dishes from competitors are in the $10–$13 price range for entrees. La Vida Lola dishes will range from $6 to $13. One key finding from Off the Grid’s report is that mobile food has “proven to be a powerful vehicle for catalyzing diverse entrepreneurship” as 30 percent of mobile food businesses are immigrant owned, 30 percent are women owned, and 8 percent are LGBTQ owned. In many instances, the owner-operator plays a vital role to the brand identity of the business as is the case with La Vida Lola. Atlanta has also tapped into the nationwide trend of food hall-style dining. These food halls are increasingly popular in urban centers like Atlanta. On one hand, these community-driven areas where food vendors and retailers sell products side by side are secondary competitors to food trucks. But they also offer growth opportunities for future expansion as brands solidify customer support in the region. The most popular food halls in Atlanta are Ponce City Market in Midtown, Krog Street Market along the BeltLine trail in the Inman Park area, and Sweet Auburn Municipal Market downtown Atlanta. In addition to these trends, Atlanta has long been supportive of international cuisine as Buford Highway (nicknamed “BuHi”) has a reputation for being an eclectic food corridor with an abundance of renowned Asian and Hispanic restaurants in particular. The Atlanta region is home to a thriving Hispanic and Latinx population, with nearly half of the region’s foreign-born population hailing from Latin America. There are over half a million Hispanic and Latin residents living in metro Atlanta, with a 150 percent population increase predicted through 2040. The median age of metro Atlanta Latinos is twenty-six. La Vida Lola will offer authentic cuisine that will appeal to this primary customer segment. La Vida Lola must contend with regulations from towns concerning operations of mobile food ventures and health regulations, but the Atlanta region is generally supportive of such operations. There are many parks and festivals that include food truck vendors on a weekly basis.

Industry Analysis and Market Strategy

According to ’ first annual report from the San Francisco-based Off The Grid, a company that facilitates food markets nationwide, the US food truck industry alone is projected to grow by nearly 20 percent from $800 million in 2017 to $985 million in 2019. Meanwhile, an report shows the street vendors’ industry with a 4.2 percent annual growth rate to reach $3.2 billion in 2018. Food truck and street food vendors are increasingly investing in specialty, authentic ethnic, and fusion food, according to the report.

Although the report projects demand to slow down over the next five years, it notes there are still opportunities for sustained growth in major metropolitan areas. The street vendors industry has been a particular bright spot within the larger food service sector.

The industry is in a growth phase of its life cycle. The low overhead cost to set up a new establishment has enabled many individuals, especially specialty chefs looking to start their own businesses, to own a food truck in lieu of opening an entire restaurant. Off the Grid’s annual report indicates the average typical initial investment ranges from $55,000 to $75,000 to open a mobile food truck.

The restaurant industry accounts for $800 billion in sales nationwide, according to data from the National Restaurant Association. Georgia restaurants brought in a total of $19.6 billion in 2017, according to figures from the Georgia Restaurant Association.

There are approximately 12,000 restaurants in the metro Atlanta region. The Atlanta region accounts for almost 60 percent of the Georgia restaurant industry. The SAM is estimated to be approximately $360 million.

The mobile food/street vendor industry can be segmented by types of customers, types of cuisine (American, desserts, Central and South American, Asian, mixed ethnicity, Greek Mediterranean, seafood), geographic location and types (mobile food stands, mobile refreshment stands, mobile snack stands, street vendors of food, mobile food concession stands).

Secondary competing industries include chain restaurants, single location full-service restaurants, food service contractors, caterers, fast food restaurants, and coffee and snack shops.

The top food truck competitors according to the , the daily newspaper in La Vida Lola’s market, are Bento Bus, Mix’d Up Burgers, Mac the Cheese, The Fry Guy, and The Blaxican. Bento Bus positions itself as a Japanese-inspired food truck using organic ingredients and dispensing in eco-friendly ware. The Blaxican positions itself as serving what it dubs “Mexican soul food,” a fusion mashup of Mexican food with Southern comfort food. After years of operating a food truck, The Blaxican also recently opened its first brick-and-mortar restaurant. The Fry Guy specializes in Belgian-style street fries with a variety of homemade dipping sauces. These three food trucks would be the primary competition to La Vida Lola, since they are in the “ethnic food” space, while the other two offer traditional American food. All five have established brand identities and loyal followers/customers since they are among the industry leaders as established by “best of” lists from area publications like the . Most dishes from competitors are in the $10–$13 price range for entrees. La Vida Lola dishes will range from $6 to $13.

One key finding from Off the Grid’s report is that mobile food has “proven to be a powerful vehicle for catalyzing diverse entrepreneurship” as 30 percent of mobile food businesses are immigrant owned, 30 percent are women owned, and 8 percent are LGBTQ owned. In many instances, the owner-operator plays a vital role to the brand identity of the business as is the case with La Vida Lola.

Atlanta has also tapped into the nationwide trend of food hall-style dining. These food halls are increasingly popular in urban centers like Atlanta. On one hand, these community-driven areas where food vendors and retailers sell products side by side are secondary competitors to food trucks. But they also offer growth opportunities for future expansion as brands solidify customer support in the region. The most popular food halls in Atlanta are Ponce City Market in Midtown, Krog Street Market along the BeltLine trail in the Inman Park area, and Sweet Auburn Municipal Market downtown Atlanta. In addition to these trends, Atlanta has long been supportive of international cuisine as Buford Highway (nicknamed “BuHi”) has a reputation for being an eclectic food corridor with an abundance of renowned Asian and Hispanic restaurants in particular.

The Atlanta region is home to a thriving Hispanic and Latinx population, with nearly half of the region’s foreign-born population hailing from Latin America. There are over half a million Hispanic and Latin residents living in metro Atlanta, with a 150 percent population increase predicted through 2040. The median age of metro Atlanta Latinos is twenty-six. La Vida Lola will offer authentic cuisine that will appeal to this primary customer segment.

La Vida Lola must contend with regulations from towns concerning operations of mobile food ventures and health regulations, but the Atlanta region is generally supportive of such operations. There are many parks and festivals that include food truck vendors on a weekly basis.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Operations and Management Plan Category	Content
Key Management Personnel	The key management personnel consist of Lola González and Cameron Hamilton, who are longtime acquaintances since college. The management team will be responsible for funding the venture as well as securing loans to start the venture. The following is a summary of the key personnel backgrounds. Chef Lola González has worked directly in the food service industry for fifteen years. While food has been a lifelong passion learned in her grandparents’ kitchen, chef González has trained under some of the top chefs in the world, most recently having worked under the James Beard Award-winning chef José Andrés. A native of Duluth, Georgia, chef González also has an undergraduate degree in food and beverage management. Her value to the firm is serving as “the face” and company namesake, preparing the meals, creating cuisine concepts, and running the day-to-day operations of La Vida Lola. Cameron Hamilton has worked in the hospitality industry for over twenty years and is experienced in accounting and finance. He has a master of business administration degree and an undergraduate degree in hospitality and tourism management. He has opened and managed several successful business ventures in the hospitality industry. His value to the firm is in business operations, accounting, and finance.
Advisory Board	During the first year of operation, the company intends to keep a lean operation and does not plan to implement an advisory board. At the end of the first year of operation, the management team will conduct a thorough review and discuss the need for an advisory board.
Supporting Professionals	Stephen Ngo, Certified Professional Accountant (CPA), of Valdosta, Georgia, will provide accounting consulting services. Joanna Johnson, an attorney and friend of chef González, will provide recommendations regarding legal services and business formation.

Operations and Management Plan Category

Content

Key Management Personnel

The key management personnel consist of Lola González and Cameron Hamilton, who are longtime acquaintances since college. The management team will be responsible for funding the venture as well as securing loans to start the venture. The following is a summary of the key personnel backgrounds.

Chef Lola González has worked directly in the food service industry for fifteen years. While food has been a lifelong passion learned in her grandparents’ kitchen, chef González has trained under some of the top chefs in the world, most recently having worked under the James Beard Award-winning chef José Andrés. A native of Duluth, Georgia, chef González also has an undergraduate degree in food and beverage management. Her value to the firm is serving as “the face” and company namesake, preparing the meals, creating cuisine concepts, and running the day-to-day operations of La Vida Lola.

Cameron Hamilton has worked in the hospitality industry for over twenty years and is experienced in accounting and finance. He has a master of business administration degree and an undergraduate degree in hospitality and tourism management. He has opened and managed several successful business ventures in the hospitality industry. His value to the firm is in business operations, accounting, and finance.

Advisory Board

During the first year of operation, the company intends to keep a lean operation and does not plan to implement an advisory board. At the end of the first year of operation, the management team will conduct a thorough review and discuss the need for an advisory board.

Supporting Professionals

Stephen Ngo, Certified Professional Accountant (CPA), of Valdosta, Georgia, will provide accounting consulting services. Joanna Johnson, an attorney and friend of chef González, will provide recommendations regarding legal services and business formation.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Marketing Plan Category	Content
Overview	La Vida Lola will adopt a concentrated marketing strategy. The company’s promotion mix will include a mix of advertising, sales promotion, public relations, and personal selling. Given the target millennial foodie audience, the majority of the promotion mix will be centered around social media platforms. Various social media content will be created in both Spanish and English. The company will also launch a crowdfunding campaign on two crowdfunding platforms for the dual purpose of promotion/publicity and fundraising.
Advertising and Sales Promotion	As with any crowdfunding social media marketing plan, the first place to begin is with the owners’ friends and family. Utilizing primarily Facebook/Instagram and Twitter, La Vida Lola will announce the crowdfunding initiative to their personal networks and prevail upon these friends and family to share the information. Meanwhile, La Vida Lola needs to focus on building a community of backers and cultivating the emotional draw of becoming part of the La Vida Lola family. To build a crowdfunding community via social media, La Vida Lola will routinely share its location, daily if possible, on both Facebook, Instagram, and Twitter. Inviting and encouraging people to visit and sample their food can rouse interest in the cause. As the campaign is nearing its goal, it would be beneficial to offer a free food item to backers of a specific level, say $50, on one specific day. Sharing this via social media in the day or two preceding the giveaway and on the day of can encourage more backers to commit. Weekly updates of the campaign and the project as a whole are a must. Facebook and Twitter updates of the project coupled with educational information sharing helps backers feel part of the La Vida Lola community. Finally, at every location where La Vida Lola is serving its food, signage will notify the public of their social media presence and the current crowdfunding campaign. Each meal will be accompanied by an invitation from the server for the patron to visit the crowdfunding site and consider donating. Business cards listing the social media and crowdfunding information will be available in the most visible location, likely the counter. Before moving forward with launching a crowdfunding campaign, La Vida Lola will create its website. The website is a great place to establish and share the La Vida Lola brand, vision, videos, menus, staff, and events. It is also a great source of information for potential backers who are unsure about donating to the crowdfunding campaigns. The website will include these elements: . Address the following questions: Who are you? What are the guiding principles of La Vida Lola? How did the business get started? How long has La Vida Lola been in business? Include pictures of chef González. List of current offerings with prices. Will include promotional events and locations where customers can find the truck for different events. Steps will be taken to increase social media followers prior to launching the crowdfunding campaign. Unless a large social media following is already established, a business should aggressively push social media campaigns a minimum of three months prior to the crowdfunding campaign launch. Increasing social media following prior to the campaign kickoff will also allow potential donors to learn more about La Vida Lola and foster relationship building before attempting to raise funds.
Facebook Content and Advertising	The key piece of content will be the campaign pitch video, reshared as a native Facebook upload. A link to the crowdfunding campaigns can be included in the caption. Sharing the same high-quality video published on the campaign page will entice fans to visit Kickstarter to learn more about the project and rewards available to backers.
Crowdfunding Campaigns	Foodstart was created just for restaurants, breweries, cafés, food trucks, and other food businesses, and allows owners to raise money in small increments. It is similar to Indiegogo in that it offers both flexible and fixed funding models and charges a percentage for successful campaigns, which it claims to be the lowest of any crowdfunding platform. It uses a reward-based system rather than equity, where backers are offered rewards or perks resulting in “low-cost capital and a network of people who now have an incentive to see you succeed.” Foodstart will host La Vida Lola’s crowdfunding campaigns for the following reasons: (1) It caters to their niche market; (2) it has less competition from other projects which means that La Vida Lola will stand out more and not get lost in the shuffle; and (3) it has/is making a name/brand for itself which means that more potential backers are aware of it. La Vida Lola will run a simultaneous crowdfunding campaign on Indiegogo, which has broader mass appeal.
Publicity	Social media can be a valuable marketing tool to draw people to the Foodstarter and Indiegogo crowdfunding pages. It provides a means to engage followers and keep funders/backers updated on current fundraising milestones. The first order of business is to increase La Vida Lola’s social media presence on Facebook, Instagram, and Twitter. Establishing and using a common hashtag such as #FundLola across all platforms will promote familiarity and searchability, especially within Instagram and Twitter. Hashtags are slowly becoming a presence on Facebook. The hashtag will be used in all print collateral. La Vida Lola will need to identify social influencers—others on social media who can assist with recruiting followers and sharing information. Existing followers, family, friends, local food providers, and noncompetitive surrounding establishments should be called upon to assist with sharing La Vida Lola’s brand, mission, and so on. Cross-promotion will further extend La Vida Lola’s social reach and engagement. Influencers can be called upon to cross promote upcoming events and specials. The crowdfunding strategy will utilize a progressive reward-based model and establish a reward schedule such as the following: In addition to the publicity generated through social media channels and the crowdfunding campaign, La Vida Lola will reach out to area online and print publications (both English- and Spanish-language outlets) for feature articles. Articles are usually teased and/or shared via social media. Reaching out to local broadcast stations (radio and television) may provide opportunities as well. La Vida Lola will recruit a social media intern to assist with developing and implementing a social media content plan. Engaging with the audience and responding to all comments and feedback is important for the success of the campaign. Some user personas from segmentation to target in the campaign:

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
Would you have started the Laughing Man Foundation?
What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

What steps should the new restaurant take to create a new business plan?
Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
54 Foodstart. http://foodstart.com
55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

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How to Write the Market Analysis Section of a Business Plan

Written by Dave Lavinsky

industry description and target market analysis

What is the Market Analysis in a Business Plan?

The market analysis section of your business plan is where you discuss the size of the market in which you’re competing and market trends that might affect your future potential such as economic, political, social and/or technological shifts.

This helps you and readers understand if your market is big enough to support your business’ growth, and whether future conditions will help or hurt your business. For example, stating that your market size is $56 billion, has been growing by 10% for the last 10 years, and that trends are expected to further increase the market size bodes well for your company’s success.

Download our Ultimate Business Plan Template here

What Should a Market Analysis Include?

You’ll want to address these issues in your market analysis:

Size of Industry – How big is the overall industry?
Projected Growth Rate of Industry – Is the industry growing or shrinking? How fast?
Target Market – Who are you targeting with this product or service?
Competition – How many businesses are currently in the same industry?

Learn how to write the full market analysis below.

How to Write a Market Analysis

Here’s how to write the market analysis section of a business plan.

Describe each industry that you are competing in or will be targeting.
Identify direct competition, but don’t forget about indirect competition – this may include companies selling different products to the same potential customer segments.
Highlight strengths and weaknesses for both direct and indirect competitors, along with how your company stacks up against them based on what makes your company uniquely positioned to succeed.
Include specific data, statistics, graphs, or charts if possible to make the market analysis more convincing to investors or lenders.

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Industry overview.

In your industry overview, you will define the market in which you are competing (e.g., restaurant, medical devices, etc.).

You will then detail the sub-segment or niche of that market if applicable (e.g., within restaurants there are fast food restaurants, fine dining, etc.).

Next, you will describe the key characteristics of your industry. For example, discuss how big the market is in terms of units and revenues. Let the reader know if the market is growing or declining (and at what rate), and what key industry trends are facing your market.

Use third-party market research as much as possible to validate the discussion of your industry.

Here is a list of additional items you may analyze for a complete industry overview:

An overview of the current state of the industry . How big is it, how much does it produce or sell? What are its key differentiators from competitors? What is its target customer base like – demographic information and psychographics? How has the industry performed over time (global, domestic)?
Analyze the macro-economic factors impacting your industry . This includes items such as economic growth opportunities, inflation, exchange rates, interest rates, labor market trends, and technological improvements. You want to make sure that all of these are trending in a positive direction for you while also being realistic about them. For example, if the economy is in shambles you might want to wait before entering the particular market.
Analyze the political factors impacting your industry . This is an often-overlooked section of any business plan, but it can be important depending on what type of company you are starting. If you’re in a highly regulated industry (such as medical devices), this is something that you’ll want to include.
Analyze the social factors impacting your industry . This includes analyzing society’s interest in your product or service, historical trends in buying patterns in your industry, and any effects on the industry due to changes in culture. For example, if there is a growing counter-culture trend against big oil companies you might want to position yourself differently than a company in this industry.
Analyze the technological factors impacting your industry . This includes analyzing new technologies being developed in software, hardware, or applications that can be used to improve your product or service. It also includes emerging consumer trends and will be highly dependent on your business type. In a technology-related venture, you would analyze how these changes are impacting consumers. For an educational-related venture, you would analyze how these changes are impacting students, teachers, and/or administrators.

For each of these items, you want to provide some detail about them including their current state as well as what external factors have played a role in the recent past. You can also include many other important factors if they apply to your business including demographic trends, legal issues, environmental concerns, and sustainability issues.

When you are done analyzing all of these factors, wrap it up by summing them up in a statement that includes your view on the future of the industry. This should be positive to attract investors, potential customers, and partners.

If you’re having trouble thinking about all of these factors then it might be helpful to first develop a SWOT analysis for your business.

Once you have an understanding of the market, you’ll need to think about how you will position yourself within that potential market.

Picking Your Niche

You want to think about how large your market is for this venture. You also want to consider whether you’d like to pick a niche within the overall industry or launch yourself into the mainstream.

If you have an innovative product it can be easier to enter the mainstream market – but at the same time, you might face some additional competition if there are similar products available.

You can choose to specialize in a niche market where you’ll face less competition – but might be able to sell your services at a higher price point (this could make it easier for you to get potential customers).

Of course, if your product or service is unique then there should be no competition. But, what happens if it isn’t unique? Will you be able to differentiate yourself enough to create a competitive advantage or edge?

If you are planning on entering the mainstream market, think about whether there are different sub-niches within your specific market. For example, within the technology industry, you can choose to specialize in laptops or smartphones or tablets, or other categories. While it will be more difficult to be unique in a mainstream market, you will still be able to focus on one type or category of products.

How Will You Stand Out?

Many companies are able to stand out – whether by offering a product that is unique or by marketing their products in a way that consumers notice. For example, Steve Jobs was able to take a business idea like the iPhone and make it into something that people talked about (while competitors struggled to play catch up).

You want your venture to stand out – whether with an innovative product or service or through marketing strategies. This might include a unique brand, name, or logo. It might also include packaging that stands out from competitors.

Write down how you will achieve this goal of standing out in the marketplace. If it’s a product, then what features do you have that other products don’t? If it’s a service, then what is it about this service that will make people want to use your company rather than your competition?

You also need to think about marketing. How are you going to promote yourself or sell your product or service? You’ll need a marketing plan for this – which might include writing copy, creating an advertisement, setting up a website, and several other activities. This should include a description of each of these strategies.

If you’re struggling with the details of any of these sections, it might be helpful to research what other companies in your market are doing and how they’ve been successful. You can use this business information to inform your own strategies and plans.

Relevant Market Size & Competition

In the second stage of your analysis, you must determine the size and competition in your specific market.

Target Market Section

Your company’s relevant market size is the amount of money it could make each year if it owned a complete market share.

It’s simple.

To begin, estimate how many consumers you expect to be interested in purchasing your products or services each year.

To generate a more precise estimate, enter the monetary amount these potential customers may be ready to spend on your goods or services each year.

The size of your market is the product of these two figures. Calculate this market value here so that your readers can see how big your market opportunity is (particularly if you are seeking debt or equity funding).

You’ll also want to include an analysis of your market conditions. Is this a growing or declining market? How fast is it growing (or declining)? What are the general trends in the market? How has your market shifted over time?

Include all of this information in your own business plan to give your readers a clear understanding of the market landscape you’re competing in.

The Competition

Next, you’ll need to create a comprehensive list of the competitors in your market. This competitive analysis includes:

Direct Competitors – Companies that offer a similar product or service
Indirect Competitors – Companies that sell products or services that are complementary to yours but not directly related

To show how large each competitor is, you can use metrics such as revenue, employees, number of locations, etc. If you have limited information about the company on hand then you may want to do some additional research or contact them directly for more information. You should also include their website so readers can learn more if they desire (along with social media profiles).

Once you complete this list, take a step back and try to determine how much market share each competitor has. You can use different methods to do this such as market research, surveys, or conduct focus groups or interviews with target customers.

You should also take into account the barriers to entry that exist in your market. What would it take for a new company to enter the market and start competing with you? This could be anything from capital requirements to licensing and permits.

When you have all of this information, you’ll want to create a table like the one below:

Once you have this data, you can start developing strategies to compete with the other companies which will be used again later to help you develop your marketing strategy and plan.

Writing a Market Analysis Tips

Include an explanation of how you determined the size of the market and how much share competitors have.
Include tables like the one above that show competitor size, barriers to entry, etc.
Decide where you’re going to place this section in your business plan – before or after your SWOT analysis. You can use other sections as well such as your company summary or product/service description. Make sure you consider which information should come first for the reader to make the most sense.
Brainstorm how you’re going to stand out in this competitive market.

Formatting the Market Analysis Section of Your Business Plan

Now that you understand the different components of the market analysis, let’s take a look at how you should structure this section in your business plan.

Your market analysis should be divided into two sections: the industry overview and market size & competition.

Each section should include detailed information about the topic and supporting evidence to back up your claims.

You’ll also want to make sure that all of your data is up-to-date. Be sure to include the date of the analysis in your business plan so readers know when it was conducted and if there have been any major changes since then.

In addition, you should also provide a short summary of what this section covers at the beginning of each paragraph or page. You can do this by using a title such as “Industry Overview” or another descriptive phrase that is easy to follow.

As with all sections in a business plan, make sure your market analysis is concise and includes only the most relevant information to keep your audience engaged until they reach your conclusion.

A strong market analysis can give your company a competitive edge over other businesses in its industry, which is why it’s essential to include this section in your business plan. By providing detailed information about the market you’re competing in, you can show your readers that you understand the industry and know how to capitalize on current and future trends.

Business Plan Market Analysis Examples

The following are examples of how to write the market analysis section of a business plan:

Business Plan Market Analysis Example #1 – Hosmer Sunglasses, a sunglasses manufacturer based in California

According to the Sunglass Association of America, the retail sales volume of Plano (non-prescription) sunglasses, clip-on sunglasses, and children’s sunglasses (hereinafter collectively referred to as “Sunwear”) totaled $2.9 billion last year. Premium-priced sunglasses are driving the Plano Sunwear market. Plano sunglasses priced at $100 or more accounted for more than 49% of all Sunwear sales among independent retail locations last year.

The Sunglass Association of America has projected that the dollar volume for retail sales of Plano Sunwear will grow 1.7% next year. Plano sunglass vendors are also bullish about sales in this year and beyond as a result of the growth of technology, particularly the growth of laser surgery and e-commerce.

Business Plan Market Analysis Example #2 – Nailed It!, a family-owned restaurant in Omaha, NE

According to the Nebraska Restaurant Association, last year total restaurant sales in Nebraska grew by 4.3%, reaching a record high of $2.8 billion. Sales at full-service restaurants were particularly strong, growing 7% over 2012 figures. This steady increase is being driven by population growth throughout the state. The Average Annual Growth Rate (AGR) since 2009 is 2.89%.

This fast growth has also encouraged the opening of new restaurants, with 3,035 operating statewide as of this year. The restaurant industry employs more than 41,000 workers in Nebraska and contributes nearly $3 billion to the state economy every year.

Nebraska’s population continues to increase – reaching 1.9 million in 2012, a 1.5% growth rate. In addition to population, the state has experienced record low unemployment every year since 2009 – with an average of 4.7% in 2013 and 2014.

Business Plan Market Analysis Example #3 – American Insurance Company (AIC), a chain of insurance agencies in Maine

American Insurance Company (AIC) offers high-quality insurance at low prices through its chain of retail outlets in the state of Maine. Since its inception, AIC has created an extensive network of agents and brokers across the country with expanding online, call center and retail business operations.

AIC is entering a market that will more than double in size over the next 50 years according to some industry forecasts. The insurance industry is enjoying low inflation rates, steady income growth, and improving standards of living for most Americans during what has been a difficult period for much of American business. This makes this a good time to enter the insurance industry as it enjoys higher margins because customers are purchasing more coverage due to increased costs from medical care and higher liability claims.

American Insurance Company provides affordable homeowners, auto, and business insurance through high-quality fulfillment centers across America that have earned a reputation for top-notch customer service.

AIC will face significant competition from both direct and indirect competitors. The indirect competition will come from a variety of businesses, including banks, other insurance companies, and online retailers. The direct competition will come from other well-funded start-ups as well as incumbents in the industry. AIC’s competitive advantages include its low prices, high quality, and excellent customer service.

AIC plans to grow at a rate that is above average for the industry as a whole. The company has identified a market that is expected to grow by more than 100% in the next decade. This growth is due to several factors: the increase in the number of two-income households, the aging population, and the impending retirement of many baby boomers will lead to an increase in the number of people who are purchasing insurance.

AIC projects revenues of $20M in year one, which is equivalent to 100% growth over the previous year. AIC forecasts revenue growth of 40%-60% each year on average for 10 years. After that, revenue growth is expected to slow down significantly due to market saturation.

The following table illustrates these projections:

Competitive Landscape

Direct Competition: P&C Insurance Market Leaders

Indirect Competition: Banks, Other Insurance Companies, Retailers

Market Analysis Conclusion

When writing the market analysis section, it is important to provide specific data and forecasts about the industry that your company operates in. This information can help make your business plan more convincing to potential investors.

If it’s helpful, you should also discuss how your company stacks up against its competitors based on what makes it unique. In addition, you can identify any strengths or weaknesses that your company has compared to its competitors.

Based on this data, provide projections for how much revenue your company expects to generate over the next few years. Providing this information early on in the business plan will help convince investors that you know what you are talking about and your company is well-positioned to succeed.

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Other Resources for Writing Your Business Plan

How to Write a Great Business Plan Executive Summary How to Expertly Write the Company Description in Your Business Plan The Customer Analysis Section of Your Business Plan Completing the Competitive Analysis Section of Your Business Plan The Management Team Section of Your Business Plan Financial Assumptions and Your Business Plan How to Create Financial Projections for Your Business Plan Everything You Need to Know about the Business Plan Appendix Best Business Plan Software Business Plan Conclusion: Summary & Recap

What is a Business Plan? Definition, Tips, and Templates

Published: June 28, 2024

Years ago, I had an idea to launch a line of region-specific board games. I knew there was a market for games that celebrated local culture and heritage. I was so excited about the concept and couldn't wait to get started.

Business plan graphic with business owner, lightbulb, and pens to symbolize coming up with ideas and writing a business plan.

But my idea never took off. Why? Because I didn‘t have a plan. I lacked direction, missed opportunities, and ultimately, the venture never got off the ground.

And that’s exactly why a business plan is important. It cements your vision, gives you clarity, and outlines your next step.

In this post, I‘ll explain what a business plan is, the reasons why you’d need one, identify different types of business plans, and what you should include in yours.

Table of Contents

What is a business plan?

What is a business plan used for.

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Purposes of a Business Plan

What does a business plan need to include, types of business plans.

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A business plan is a comprehensive document that outlines a company's goals, strategies, and financial projections. It provides a detailed description of the business, including its products or services, target market, competitive landscape, and marketing and sales strategies. The plan also includes a financial section that forecasts revenue, expenses, and cash flow, as well as a funding request if the business is seeking investment.

The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.

The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.

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Use Of Demographic Analysis In Business Plan
Major Demographic Economic Social And Cultural Factors Business Plan
How to Write a Business Plan

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COMMENTS

Market research and competitive analysis
Market research blends consumer behavior and economic trends to confirm and improve your business idea. It's crucial to understand your consumer base from the outset. Market research lets you reduce risks even while your business is still just a gleam in your eye. Gather demographic information to better understand opportunities and ...
How to do a market analysis for a business plan
Renewal rate = 1 / useful life of a desk. Volume of transactions = total number of desks x renewal rate. Value of one transaction = average price of a desk. Market value = volume of transactions x value of one transaction. You should be able to find most of the information for free in this example.
8 Components of a Business Plan
There are eight essential components, all of which are detailed in this handy guide. 1. Executive Summary. The executive summary opens your business plan, but it's the section you'll write last. It summarizes the key points and highlights the most important aspects of your plan.
13 Key Business Plan Components
13 Key Business Plan Components. We've built a comprehensive guide to the major parts of a business plan for you. From elements like the executive summary to product descriptions, traction, and financials, we'll guide you on all of the key sections you should include in your business plan. December 14th, 2022 | By: The Startups Team | Tags ...
A Comprehensive Business Plan Template for Small Business
The products or services section of your business plan should clearly describe what products and/or services you're selling with an emphasis on the value you're providing to your customers or clients. This section will also include pricing information, a comparison to similar products or services in the market, and an outline of future offerings.
Writing a Comprehensive Business Plan
Crafting a comprehensive business plan is not just a formality; it's a roadmap to your venture's success. From securing funding to navigating market challenges, a well-structured business plan encompasses essential elements like financial projections, market analysis, and organizational structure, ensuring you're prepared for every twist and turn on your entrepreneurial journey.
How to Write a Market Analysis for a Business Plan
Step 4: Calculate market value. You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value. A top-down analysis tends to be the easier option of the ...
10 Important Components of an Effective Business Plan
Effective business plans contain several key components that cover various aspects of a company's goals. The most important parts of a business plan include: 1. Executive summary. The executive summary is the first and one of the most critical parts of a business plan. This summary provides an overview of the business plan as a whole and ...
Business Plan Example and Template
Here is a basic template that any business can use when developing its business plan: Section 1: Executive Summary. Present the company's mission. Describe the company's product and/or service offerings. Give a summary of the target market and its demographics.
Parts of a Business Plan: 7 Essential Sections
Member Benefits. Select one or more filters to access resources for your specific needs. Function. Finance & Accounting. Human Resources. Technology. Insurance. Legal. Marketing.
The 12 Key Components of a Business Plan (2023)
Some entrepreneurs choose to use diagrams and charts, while others rely on text alone. Regardless of how you go about it, good business plans tend to include the following elements: Executive summary. Company description. Market analysis. Marketing plan. Sales plan. Competitive analysis. Organizational structure.
How to Write a Business Plan: Target Market Analysis
Sections of your market analysis should include: Industry Description and Outlook. Target Market. Market Research Results. Competitive Analysis. Remember to properly cite your sources of information within the body of your market analysis as you write it. You and other readers of your business plan, such as potential investors, will need to ...
Business Plan Demographics
What are business plan demographics? Sorting through demographic data for your business' potential customers is the first step in understanding what type of person (or business) might be interested in your product or service. It can provide an unofficial ceiling to the number of customers you might expect.
11.4 The Business Plan
The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs. Purposes of a Business Plan. A business plan can serve many different purposes—some internal, others external.
The 10 Key Components of a Business Plan
The 10 sections or elements of a business plan that you must include are as follows: 1. Executive Summary. The executive summary provides a succinct synopsis of the business plan, and highlights the key points raised within. It often includes the company's mission statement and description of the products and services.
The 10 Components of a Business Plan
That's where your business plan comes in. It provides investors, lenders and potential partners with an understanding of your company's structure and goals. If you want to gain the financial autonomy to run a business or become an entrepreneur, a financial advisor can help align your finances. 1. Executive Summary.
Write your business plan
A good business plan guides you through each stage of starting and managing your business. You'll use your business plan as a roadmap for how to structure, run, and grow your new business. It's a way to think through the key elements of your business. Business plans can help you get funding or bring on new business partners.
How to Write the Market Analysis Section of a Business Plan
Here's how to write the market analysis section of a business plan. Describe each industry that you are competing in or will be targeting. Identify direct competition, but don't forget about indirect competition - this may include companies selling different products to the same potential customer segments.
What is a Business Plan? Definition, Tips, and Templates
A business plan is a comprehensive document that outlines a company's goals, strategies, and financial projections. It provides a detailed description of the business, including its products or services, target market, competitive landscape, and marketing and sales strategies.
PDF What to Include in a Business Plan
A Canadian business plan should include the following elements: • Executive Summary: This section provides a brief overview of the business, its products or services, and its goals. • Company Description: This section provides a more detailed description of the company, including its history, ownership, management structure, and location.
Assignment: Chapter 06: Visualizing Your Dream: The Business ...
Study with Quizlet and memorize flashcards containing terms like An entrepreneur needs to prove their business concept can be translated into a viable, profitable business. What will provide the best evidence of this? a. Porter's five forces b. business model c. business model canvas d. SWOT analysis, All of the following are benefits of using the Business Model Canvas, EXCEPT for which one? a ...

8 Components of a Business Plan

1. Executive Summary

3. Products/Services Offered

Industry analysis

Competitor analysis

Target market analysis

SWOT analysis

5. Marketing and Sales Strategies

Marketing and advertising plan

Sales strategy and tactics

Pricing strategy

Operational plan

Technology plan

Management and organizational structure

Personnel plan

Startup Costs

Financial projections

Break-even analysis

Funding requirements and sources

Key performance indicators (KPIs)

8. Appendices

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Crafting the Perfect Business Plan: A Deep Dive with Upmetrics’ Vinay Kevadiya

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What to Include in Your Business Plan Appendix?

Everything You Need to Know About Writing a Comprehensive Business Plan

What is a business plan and why is it important?

Overview of the role a business plan plays in securing funding

Explanation of how a business plan helps in strategic planning and operational guidance

Related Blogs

What are the essential elements of a comprehensive business plan?

Breakdown of the market analysis and competitive landscape

Importance of financial projections and funding requirements

Discussion on the organizational structure and management team

How do you conduct market research for your business plan?

Identifying target audience and customer demographics

Analyzing industry trends and competitors’ strengths and weaknesses

4 What financial data should be included in a business plan?

Explanation of break-even analysis and cash flow statements

Importance of including funding sources and investment requirements

How can you effectively present your business plan?

Tips for creating engaging visual aids and supporting documents

Strategies for tailoring the presentation to different audiences

What common mistakes should be avoided when writing a business plan?

Importance of avoiding vague language and unclear objectives

Consequences of neglecting market research and competitor analysis

7 How can you revise and update your business plan over time?

Strategies for incorporating feedback from stakeholders

Discussion on adapting to changes in the market or business environment

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How to Write a Market Analysis for a Business Plan

How to conduct a market analysis: A step-by-step guide

Step 1: Define your objective

Step 2: Provide an industry outlook

Market size

Product life cycle

Projected growth

Step 3: Determine your target market

Demographics

Create a customer persona

Research and supporting material

Step 4: Calculate market value

Step 5: Get to know your competition

Step 6: Identify your barriers

Step 7: Know the regulations

Tips when writing your market analysis

Use visual aids

Include a summary

Get to the point

Revisit your market analysis regularly

Why should you write a market analysis?

1. Learn how to analyze the market need

2. Learn about your customers

3. Get approved for a business loan

4. Beat the competition

Final thoughts

Business Plan Example and Template

What is a Business Plan?