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How to Write a Market Analysis for a Business Plan

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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

  • Regulation

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.

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.

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

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.

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Everything You Need for Starting a Pressure Washing Business

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If you have an entrepreneurial spirit and feel ready to go into business yourself, the pressure washing business could be the best option for you.

Starting a power washing business doesn’t require lengthy learning and the startup costs are relatively low. Since the demand for such services is always high, this business can provide a solid flow of income if mastered and managed properly.

Like any other business, a successful power washing business requires proper preparation and planning and this article offers a step-by-step guide for embarking on such an entrepreneurial journey.

Research the Market

Doing some in-depth research about the pressure washing market, what customers you want to target, and how many similar businesses are already operating in your area is essential. Even though this business is expected to register decent growth in the coming years, you should still dig a little deeper to see if there’s more work than the existing pressure washers can take on.

You can choose to focus on residential accounts or take on commercial clients. If you feel that you can manage more work, explore opportunities for pressure washing in surrounding neighborhoods and towns.

Proper research and identifying what opportunities exist is a crucial step in establishing a flourishing pressure washing business.

Get Your License

The moment you decide that this type of business is a golden opportunity, you need to check the local requirements for doing business as a pressure washer.

Depending on the state you live in, you may or may not need a business license. However, you should apply and obtain one before getting started as it will cover you legally. Make sure to check with your local authorities on what the rules and regulations are to stay on the right side of the law. 

This is also a major plus when attracting potential customers as they’ll feel more comfortable and it will help establish trust in your business. It may also help in meeting the requirements of other parties, such as vendors, who might want to see your license before deciding to do business.

Get Insurance

Even though it sounds easy to start a pressure washing business, make sure that you develop the proper skills on how to pressure wash without destroying the surrounding area, damaging your client’s siding, and causing an injury to yourself or somebody else.  

However, accidents happen, so in order to protect your new business from claims of negligence, injuries, accidents, financial risks, and legal fees, you should purchase insurance coverage. Nowadays, insurance companies can provide you with a quote for pressure washing insurance online, so you don’t have to waste time standing in lines.

Not only is pressure washing insurance a safety net for your business, but new potential clients will also take this as a positive sign that you’re a professional who takes their job seriously and ensures customer satisfaction.  

Choose Equipment

Depending on your service offering and scope, the type of equipment you’ll need might vary. If you only intend on working for residential clients, then you’ll be good to go with a pressure washer with a force of up to around 4,000 PSI, but for commercial work, you’ll need stronger equipment that offers more functionalities. Since this business is physically demanding, choose equipment that is fast but safe and helps you get certain jobs done efficiently.

Practicing also plays a big role as you don’t want to accidentally damage someone’s landscape while power washing their siding. Regardless of how technologically advanced your equipment is, not knowing how to efficiently handle it can get you bad reviews and cause unwanted accidents and lawsuits.

Before making any big investments, rent a pressure washer and practice on your friends’ patios, or driveways as this will give you the best hands-on experience.

Price Your Services

Once you’re done with all the administrative work, decide on your pressure washing service prices. Since you’re a new business owner, you should start with lower prices while trying to attract new clients.

Test what hourly rate gets you most jobs and try to slowly but surely bump the price up every year as your expertise gets better.

It might feel overwhelming at the beginning but focus on mastering few services first and settle on a rate that works for you. As you improve your skills and your business grows, you can adjust your prices accordingly.

Final Thoughts

Market research, obtaining the right pressure washing insurance, choosing the right equipment, and pricing your services, are all important aspects on the road to becoming a successful business owner.

We’re sure that you’ll be glad to have considered all the above-mentioned steps once your pressure washing business is set up and running.

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A Basic Guide to Starting a Home-Based Business

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Starting a business in 2021 is much easier than it was twenty years ago. With advanced technology and digital marketing, anyone can step into the role of an entrepreneur. In some cases, all you need is an idea and a computer.

Becoming a business owner is a path to financial security. Even if you don’t give up your day job, starting a home-based business can lead to financial freedom down the road. 

Are you wondering how to start a business? Keep reading for an essential guide to getting started.

Choosing a Home-based Business

Choosing a business that’s right for you is vital to your success. You want something you’ll stick to for the long run. The best home-based businesses are those you can operate from the comfort of your home. 

Start looking at things you are good at and research to learn if there is a market for what you want to offer. For example, if you have certification in accounting, you can start a business performing accounting services for other small businesses.

Creating a Business Plan

Like any business, it’s essential to create a business plan. This document outlines what your business offers, competitor analysis, marketing strategy, and financial goals.   

The business plan is a great way to measure success and to remain focused on reaching your goals. If you’re starting a business and require financial backing, you’ll need a business plan to show lenders. 

You can maximize solar savings by creating a green business.

Incorporate Your Business

A home-based business is no different from starting any other business model. You want to incorporate your business to add a layer of protection. It’s also valuable for opening a business bank account. 

Separating your business from your personal assets is essential in growing a business. It will help you build business credit. Plus, if you are ever sued, you don’t want someone going after your personal property. 

Get an ECommerce Website

Once the paperwork is done and your finances are in order, it’s time to get your business website up and running. Most businesses can benefit from an eCommerce website. These websites help grow efficient businesses that do not require a physical location or multiple employees.

With an eCommerce website, you can sell products, take deposits on bookings, and so much more. 

Marketing 

A powerful marketing strategy is essential to a home-based business. Determine which social media platforms have the greatest reach for getting noticed by your target audience. 

Use your website’s blog options and photo storage as a launching pad for the information you’ll share on online platforms. 

Don’t be afraid to try different marketing trends, including digital ads.

It’s Time to Invest in a Business

A home-based business is an excellent investment. Once your business is up and running and turning a profit, consider a second start-up. The potential is limitless.

If you need more great tips and information on business start-up trends, we have you covered. Continue to browse our site and check back often for new content.

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How To Set Up a Successful Electronic Business

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Consumers can purchase a range of mechanical items and parts from an electronics company, such as cell phones, televisions, computers, peripherals, and components. If you aim to create this type of business, you should arm yourself with knowledge so you don’t end up like huge electronic retailers that collapse. Read on!

1.Examine Other Electronic  Businesses

Examine and comprehend the business models of existing electronics businesses before starting your own. This comprises the typical markup on commodities, overall consumer satisfaction strategies, and managing supplier relationships. You’ll need this information to determine competitive store policies and prices. Compare and contrast the success of successful electronics stores with those that have closed or failed.

2.Research Your Interest Area of Establishment

If you’re just starting, you’ll focus on the local industry first. It’s also possible that you won’t be the first to play the electronic game. You may be competing with a lot of other small businesses in addition to big stores.

Make sure you do your homework before deciding where you want to locate your business and whether it is a good idea to do so. If your neighbourhood is densely packed with stores, consider looking on the opposite side of town or imagining how you may stand out. People may be hesitant to go through your doors if you come in and offer nothing more than another store.

3.Obtain The Necessary Permits

Check with your state and city to determine if there are any additional criteria for opening your store. If you repair computers, you may be required to pass a state-licensed test to ensure that you are aware and capable of providing proper care.

You’ll also need to check into various business licenses and other forms of documents to ensure that you’re following all of the rules.

4.Have a Competitive Business Plan

Due to the competitive nature of the electronics retail industry and the high risk of failure, you must develop a comprehensive business strategy that focuses on your competitive advantages. Use the information you acquired from your initial case study in the market and business profiles, as well as any personal experience you have with electronics, to show why your electronics company would thrive. 

If you’ve managed an electronics store, for example, you’ll be familiar with the inner workings of this type of retail operation and may have an advantage over other new stores.

In your plan, you need to include the brands you’ll be selling. You need to ensure that they are of both quality and outstanding market performance. For instance, working with certified wholesalers of closures and boxes, guarantee you offer the consumers new brands that are outstanding.

Also, don’t forget to include other regular but essential products such as lights and screens. This is because it is always good to offer a pool of varied products to your customers.

5.Choose a Brand For Yourself

idea

Your company’s brand is both what it stands for and how it is regarded by the broader public. Your company will stand out from the neighbourhood competition if it has a strong brand.

So, while naming your firm, don’t go with a generic name like most electrical stores these days. Try to come up with a distinctive name because the right name is really important. You can begin by considering the business’s nature. In your absence, your chosen name will operate as an extension of your brand, representing you. Part of your brand representation in what you sell. You can add some wire connectors. They are always widely in demand by everyone.

We recommend checking to see if the business name you want is available as a web domain and securing it as soon as possible so that no one else does.

6.Get Startup Funds

banknotes

For starters, you’ll need thousands of dollars to launch an electronic business in the first few months, with a large portion of that money going for rent. A significant portion of the funds will be spent on getting certain in-demand electrical goods as well as marketing your new business.

Personal cash, such as savings, loans from financial institutions, and borrowing from friends and family who are interested in assisting you in starting your business are all options for raising capital for your business.

7.Promote Your Store

Starting a business takes time and effort, as well as determination and vision. If you’ve already decided to work in this field, you should first check into legal and technical issues. After you’ve successfully achieved the first two responsibilities, you should build your brand and sell it. 

You must stay up with the most recent advances and maintain high standards at all times. It isn’t enough to have good items. To expand and develop revenue, it must be adequately publicized. The advertising team must be ready to provide you with a marketing strategy that will interest the audience.

As a result, the two key techniques of attracting new clients are word of mouth and local advertising. Many electronic stores promote in local media and provide first-time customers discounts and advertising billboards. Keep in mind that customer retention is crucial. Take extra precautions with the newcomer. 

They are your billboards. They are ecstatic and will brag about your store for hours. Be friendly to everyone that walks into the store. It’s more difficult to keep customers than it is to get them.

The Bottom Line

Starting and maintaining a business to its success is not an easy task. You need to be dedicated to the course and understand that however hard things get, you need to surpass them. Electronic stores are quite demanding, but a nice business to invest in altogether. Best of luck!

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