Small Business Market and Industry Analysis for a Business Plan

MARKET & INDUSTRY ANALYSIS

Whether your geographic target market is local, regional, national or international, it is always wise to begin your research with the industry at-large.. Know the direction and growth trends all related industry sectors are going. Are they growing, steady or declining?. And open your eyes. Don't just look for all the good news, and ignore information that may signal risks and demands for contingency planning. Remember, the first reason for the business plan is to determine feasibility, not how to attract capital. That comes later.

Product/Service Usage: Examine the growth and/or decline of similar and like products and services in your particular industry. It is possible you may want to examine industries related to or reliant on your industry. Likewise, you may want to examine industries for which yours is directly impacted by growth or decline. For example, if the automotive industry begin dramatically shifting to solar and cell-powered vehicles, then you don't want to be looking at gas additives and carburetor cleaner as the linchpins of your projected sales and sales growth.

Demographic Analysis: Examine the demographic characteristics of individuals who are the most likely candidates to purchase the products and/or services you provide. Examples include age, gender, household income, individual income, type of profession, modes of travel, ethnicity, race, and geographic location by states, regions, cities and other levels of population centers. On the other hand, your typical customer can be identified as institutions. Identify them by industries, location, size of employees, headquarters and branch locations, legal business structures, ratio analysis positioning, organizational environment, and any other characteristics which common to them or demanding your types of products and/or services.

The Competition: No business plan can ignore the competition. Examine the marketing mix of your competition. You already started considering the competition when defining products and services. Are their products and/or services identical to yours? Do they offer more or less than you? Who do they target as customers? In what geographic target markets are each of the significant competitors found? Are their prices discounted, customary or prestige? Do any of them engage in predatory pricing? How do the successful competitors advertise and promote themselves? Look at the less-than-successful competitors. Why are they not successful? You certainly want to avoid their mistakes. How old are the competitions' firms?

It is important to realize that you are attempting to take customers away from competitors. You need to give the customers a reason to leave places where they have been satisfied. In other words, why should they come to you? If a start-up, you are new and have no track record.

Research Notes: Existing and small business start-ups, more often than not, cannot afford to pay the premium prices for research offered by the more reputable marketing firms. For example, some categories of Internet, e-commerce and IT research data come at a premium. In the golf industry it's the National Golf Foundation. These documents can typically cost $500 to $2,000. Frankly, that is a lot of money to most small businesses. Every penny is being counted on for the actual start-up or ongoing operation of the venture. Therefore, seek reputable, relevant secondary data through the Bureau of the Census (demographic and economic census data). Some of the major market research firms and Biz Journals do offer some free data at their web sites. The federal government is possibly the most valuable and reliable source of research data. Sites include Fed Stats, Country Watch, Stat USA, Bureau of Economic Analysis and the Economic & Statistics Administration.

SWOT Analysis: There are more and less sophisticated ways to measure the Strengths, Weaknesses, Opportunities & Threats (SWOT) to your company targeted market. In simple terms, you examine the competition when examining the product, people, place, price and promotion elements of your market research. All SWOT analysis should be noted, but highlight the Strengths and Opportunities (SO) in your Advertising & Promotional Strategies. Highlight the Weaknesses and Threats (WT) in your Risks & Contingencies.

	Strengths	Weaknesses
Opportunities	SO	WO
Threats	ST	WT

A more sophisticated manner to address SWOT is with the use of a matrix. It provides a concise picture like the one pictured above. In short, take advantage of opportunities that fit your company's strengths (SO), find solutions to your weaknesses that allow taking advantage of opportunities (WO), strategize the use of strengths to overcome external threats (ST), and also find solutions to company weaknesses to overcome those threats (WT).

Summary: Now you want to tie all this data together in a manner that justifies the feasibility of your proposal. Use your best writing skills to summarize the pros and cons of the trends in your industry. Don't hide the facts that may not be supportive of your proposal. If the sum of the research supports your venture, then negative results are defined as risks for which contingencies must be developed. The SWOT analysis is the foundation for developing the next sections of the plan - Target Markets and Advertising & Promotion.

Note: It is imperative that secondary research data be documented. We encourage the use of footnotes and retention of hard copies or disks of data to substantiate, while reducing cluttered text in your business plan.