After you find out about your market for a business plan, you also want to communicate that knowledge to the readers of your plan. Keep your explanations clear and concise. The depth of detail in market analysis will depend a lot on the type of plan. You may not need to provide a complete market study in a plan developed for internal use, when all of your team knows the market well. Maybe you'll just cite the type of customers you attract and the part of town you serve. The market analysis section in a business plan is the section that is most likely to require research for information from outside your business, while most others require thinking and analysis of factors within your business.
This is a good point to add a word of caution about the level of detail required. Please remember that planning is about making good decisions, applying focus, and enforcing priorities. A useful business plan doesn't necessarily include a market analysis suitable for a Ph.D. candidate in market research. Planning is not about testing your knowledge. If you are looking for investment, then you may have to use this section to display your wisdom and understanding of your industry, but don't overdo it. If you are planning an internal plan and have no audience other than your own team, I recommend enough market research to make sure you're not missing key points.
The value of information is limited by its impact on decisions. If more market information is not going to help you do something better, then don't bother.
Begin with a Summary
Your market section should begin with a simple summary. You should generally describe the different groups of target customers included in your market analysis and refer briefly to why you are selecting these as targets. You may also want to summarize market growth, citing highlights of some growth projections, if you have this information available.
Assume that this paragraph might be included in a loan application or summary memo, so you need it to summarize the rest of the section. What information would be most important if you had only one brief topic to include about your market? A good technique is to skip this topic until you have finished the rest of the section, then go back to the summary to write the highlights.
Explain Your Segmentation
Make sure to explain and define the different segments, particularly since you refer to them and they are the basis of your strategy. What distinguishes small business from large business, if this is part of your segmentation? Do you classify them by sales, number of employees, or some other factor? I've seen segmentations that define customers by the channels they buy in, as in the retail customer compared to the wholesale or direct customer, also compared to the Internet download customer. Have you defined which segment is which, and why?
As you deal with segmentation, you should also introduce the strategy behind it and your choice of target markets. Explain why your business is focusing on these specific target market groups. What makes these groups more interesting than the other groups that you've ruled out? Why are the characteristics you specify important? This is more important for some businesses than others. A clothing boutique, for example, might focus on one set of upper-income customers instead of another for strategic reasons. An office equipment store might focus on certain business types whose needs match the firm's expertise. Some fast-food restaurants focus on families with children under driving age. Strategy is focus; it is creative and it doesn't follow prewritten formulas.
Explain Market Needs, Growth, and Trends
All marketing should be based on underlying needs. For each market segment included in your strategy, explain the market needs that lead to this group's wanting to buy your service. Did the need exist before the business was there? Are there other products or services or stores that offer different ways to satisfy this same need? Do you have market research related to this market need? It is always a good idea to try to define your retail offering in terms of target market needs, so you focus not on what you have to sell, but rather on the buyer needs you satisfy. As a shoe store, for example, are you selling shoes or are you satisfying the customer needs for covered feet? Are there really underlying needs, such as style and prestige for fashion footwear, or padding for runners, or jumping for basketball players, that relate to selling shoes? Are kids buying status with their basketball shoes?
Understand and explain market trends. What factors seem to be changing the market or changing the business? What developing trends can make a difference? Market trends could be changes in demographics, changes in customer needs, a new sense of style or fashion, or something else. It depends on what business you are in.
For example, a building supply store might note the trend toward remodeling older homes instead of buying new homes, or a trend toward more rooms in larger houses, despite smaller families, because of home offices, dens, and exercise rooms.
A grocery store might note a trend toward Asian foods or spicier foods, or toward fresher, healthier foods, or development of a new shopping area in a different part of town.
A medical supplies store might note demographic trends, as baby boomers age, leading toward more need for estate planning and retirement planning. Look to market trends as a way to get ahead of the market, to know where it is going before it gets there.
You should also understand and explain market growth in each segment. Ideally you cite experts -- a market expert, market research firm, trade association, or credible journalist.