How to Write the Market Analysis in a Business Plan

Every great business plan has at least one section that quietly screams, “I did my homework.”
That section is the market analysis. Done well, it proves you understand your
industry, your customers, and your competitors and that you’re not just winging it with a
cool logo and a dream.

In this guide, you’ll learn how to write a market analysis that sounds smart, looks professional,
and actually helps you run your business. We’ll walk through each part step by step, with
examples and simple formulas you can copy into your own business plan.

What Is a Market Analysis (and Why Does It Matter)?

A market analysis is the part of your business plan where you show that
there’s a real market for what you’re selling not just your friends saying, “I’d totally
buy that.” It combines industry analysis, target market research, and
competitive analysis into one clear story.

In practical terms, your market analysis should answer questions like:

• How big is this market, and is it growing or shrinking?
• Who exactly are your customers, and what do they care about?
• Who are your competitors, and what are they doing well (or badly)?
• Where are the opportunities, and how will you position your business?

Investors and lenders love this section because it reduces risk. If you can show that there’s
demand, room to grow, and a clear competitive edge, your whole business plan becomes more convincing.

Before You Write: Gather Your Market Research

Writing the market analysis is much easier if you start with the facts already on your side.
That means doing some basic market research first.

Where to Find Useful Data

Some great places to look for data include:

• Government sources: Census data, labor statistics, and industry reports.
• Trade associations: Many publish free or low-cost industry overviews.
• Industry reports and market research firms: For deeper insights where budget allows.
• Competitors’ websites and reviews: Goldmine for understanding what customers like or hate.
• Surveys and interviews: Ask your potential customers directly.

Don’t worry about having perfect data. For most small businesses, “good enough to make a
reasonable decision” beats “I didn’t start because I was still looking for the perfect number.”

Key Components of a Market Analysis in a Business Plan

The exact structure can vary, but most strong market analysis sections in a business plan
include the following parts:

1. Industry overview
2. Target market description
3. Market size and growth
4. Market segmentation and customer personas
5. Trends and drivers
6. Competitive analysis
7. Regulations and barriers to entry (if relevant)
8. Your positioning and competitive advantage

Let’s walk through each one and what to actually write.

1. Industry Overview: Set the Stage

Start at the wide-angle level. The industry analysis shows that you understand
the larger environment your business lives in.

What to Include

• Industry definition: What industry are you in? Be specific.
• Industry size: Total revenue or number of customers in your region.
• Growth rate: Is the industry growing, flat, or declining?
• Life cycle stage: Emerging, growing, mature, or declining.
• Key players: A few major competitors or brands everyone recognizes.

Example Paragraph

“The U.S. specialty coffee shop industry generated approximately $X billion in sales in 2024
and is expected to grow at Y% annually over the next five years. The industry is in a growth
phase, driven by increasing consumer demand for premium, ethically sourced coffee and
café-style experiences. Major players include national chains such as Starbucks and
Dunkin’, along with a growing number of independent specialty roasters.”

Notice how this example uses real data structure (even if you need to plug in your actual
numbers later) and signals that you understand what’s happening at the industry level.

2. Target Market: Define Exactly Who You Serve

One of the biggest mistakes in a market analysis is saying, “Our customers are everyone.”
That makes investors nervous and marketing nearly impossible. Your target market
needs to be focused and clearly defined.

Describe Your Ideal Customers

Break your target market into clear, human terms:

• Demographics: Age, gender, income level, education, location.
• Psychographics: Values, interests, lifestyle, attitudes.
• Behavior: How they buy, how often, what problems they need solved.

Example Target Market Description

“Our primary target market is urban professionals ages 25–40 who work within a one-mile
radius of downtown Austin. They have moderate to high disposable income, value quality
and convenience, and are willing to pay a premium for craft coffee. Many work remotely
or in hybrid roles and seek comfortable spaces to work, meet, and socialize.”

This kind of clarity makes your later marketing and sales strategy feel intentional,
not random.

3. Market Size and Growth: Show the Opportunity

Next, quantify the opportunity. This is where concepts like
TAM, SAM, and SOM (Total Addressable Market, Serviceable Available Market,
and Serviceable Obtainable Market) come in handy.

Simple Approach to Market Size

• TAM (Total Addressable Market): Everyone who could possibly buy a product like yours.
• SAM (Serviceable Available Market): The portion of that market you can realistically reach (e.g., your geography or niche).
• SOM (Serviceable Obtainable Market): The slice you expect to capture in the first few years.

For a local business, you might calculate SOM by combining the local population,
the percentage that matches your target market, and realistic penetration rates
in your first 3–5 years.

Example Market Size Paragraph

“Within a one-mile radius of our proposed location, there are approximately 12,000 working
professionals. Based on industry research, we estimate that 60% purchase coffee outside
the home at least three times per week. This yields a serviceable available market of
roughly 7,200 potential customers. If we capture just 5% of those customers in our first
year and increase to 12% by year three, our serviceable obtainable market would be
approximately 864 regular customers.”

Numbers like these don’t have to be perfect, but they should be logical and supported
by your research.

4. Market Segmentation and Customer Personas

Rarely is your target market one single, uniform blob. Market segmentation helps you
break that audience into smaller groups you can target differently.

Ways to Segment Your Market

• By demographics (students, retirees, families)
• By use case (daily commuters, weekend visitors, occasional treat buyers)
• By spending level (budget-conscious, mid-range, premium)

For each segment, create a short customer persona a semi-fictional profile
representing a typical customer. Include their goals, frustrations, and buying habits.

Sample Persona

“Remote Rachel is a 32-year-old software developer who works from home
three days a week. She visits local cafés for a change of scenery and prefers spots with
strong Wi-Fi, plenty of outlets, and comfortable seating. She typically stays for
2–3 hours and orders a premium latte plus a snack.”

Adding personas like this shows you understand the human side of your market analysis,
not just the numbers.

5. Trends and Drivers: What’s Changing in the Market?

Markets don’t stand still. Your business plan should acknowledge the key
market trends and drivers shaping your industry.

Types of Trends to Consider

• Economic: Are customers tightening budgets or spending more freely?
• Technological: New tools or platforms changing how customers buy?
• Social and cultural: Shifts in lifestyle, values, or demographics.
• Regulatory: New laws or rules that affect your operations.

For example, a rise in remote work might boost demand for coworking cafés, while
growing concern about health could drive interest in low-sugar or plant-based products.

6. Competitive Analysis: Know Who You’re Up Against

Your competitive analysis shows that you understand both direct competitors
(those offering similar products to the same customers) and indirect competitors
(those solving the same problem in a different way).

Steps for a Strong Competitive Analysis

1. Identify main competitors: Local, regional, and online.
2. Compare key factors: Price, quality, location, service, brand, reviews.
3. Analyze strengths and weaknesses: Where they shine, where they fall short.
4. Look at positioning: Who do they appeal to? How do they differentiate?
5. Find your gap: What can you offer that they don’t?

Simple Competitive Matrix

Consider adding a table in your business plan comparing you and your top 3–5 competitors
on features like:

• Average price per product
• Product range
• Location and parking
• Atmosphere and amenities
• Online reviews and ratings

After presenting the comparison, summarize how you’ll compete: Will you be more convenient,
more premium, more affordable, or more niche?

7. Regulations and Barriers to Entry (If Applicable)

In some industries, regulations and barriers to entry are a big part of the
market analysis. If your business is in healthcare, finance, food service,
or any heavily regulated sector, address this directly.

Consider mentioning:

• Licensing or certifications required
• Health, safety, or environmental regulations
• Zoning laws or local restrictions
• High startup costs or technical barriers that keep out competitors

This reassures investors that you’ve thought beyond the idea and into the real-world constraints.

8. Positioning and Competitive Advantage

Finally, tie everything together by explaining how your business fits into this market
and why you’ll win.

Questions to Answer

• What unique value do you provide to your target market?
• How will you position your brand (budget, mid-range, premium, niche)?
• What’s your sustainable competitive advantage something not easily copied?

Example Positioning Statement

“We position BrewLab Coffee as a premium yet approachable neighborhood café, offering
ethically sourced, small-batch coffee and a work-friendly environment. Unlike national
chains that focus on speed and volume, we emphasize personalized service, community
events, and a rotating menu of single-origin coffees.”

This is where your market analysis stops being just description and becomes
strategy.

Common Mistakes to Avoid in Your Market Analysis

• Being too vague: “Our market is everyone” helps no one.
• Ignoring competitors: Saying “we have no competition” is a red flag.
• Overestimating market share: Capturing 50% of a market you just discovered is… ambitious.
• Copying generic text: Lenders and investors recognize templates; tailor it to your business.
• Skipping citations and sources internally: Even if you don’t list them in the plan, keep a record for yourself.

Remember, your goal isn’t to make the market sound perfect. It’s to make it sound
understood and manageable.

How to Present Your Market Analysis in the Business Plan

Once you’ve done the research and writing, format this section so that it’s easy to scan.
Investors are busy and may skim first, then read deeply if they like what they see.

Formatting Tips

• Use clear headings and subheadings for each component.
• Break up text with bullet points where appropriate.
• Use charts or tables for market size and competitive comparisons.
• Keep paragraphs short and focused on a single idea.
• Highlight key numbers and insights in bold.

A clean, well-structured market analysis improves not just your
business plan but also your thinking. You’ll spot risks earlier, refine
your marketing strategy, and avoid launching into a market that doesn’t actually exist.

Real-World Experience: Lessons from Writing Market Analyses

Theory is great, but the best lessons often come from actually writing and using market
analyses. Here are some practical insights and “I wish I’d known that earlier” moments
from real-world experience with business planning.

1. Start Small, Then Add Complexity

Many founders freeze at the words “market size” and “industry analysis” because they
imagine they need a 60-page consulting report. In practice, the best market analyses
often start as simple one-page summaries. You can begin with basic questions:

• Who exactly will buy this?
• How many of those people or companies are in my area or niche?
• What are they spending money on now to solve this problem?

Once you have that first simple draft, it’s much easier to layer in data, refine your
assumptions, and expand the section for your business plan.

2. Talk to Real People, Not Just Spreadsheets

One of the most underrated “research tools” is a conversation. Founders who spend a few
hours talking with potential customers often get clearer insight than those who spend
days reading reports.

For example, a founder launching a meal-prep service might assume busy parents want
gourmet, chef-designed menus. After a dozen interviews, they may discover customers
actually care more about predictable pricing and meals kids will reliably eat. That
insight changes everything pricing, marketing, and even the product.

In your market analysis, you can reference these informal findings as “customer
interviews” or “informal surveys,” which still count as valid research.

3. Your First Numbers Will Be Wrong and That’s Okay

Early-stage projections are educated guesses. Investors know this. What they’re really
looking for is whether your assumptions are reasonable and whether you understand what
would cause the numbers to change.

Instead of chasing perfect numbers, focus on transparent assumptions. For instance:

• “We assume a 5% capture rate of our serviceable market by year three.”
• “We assume an average order value of $35 based on current competitor pricing.”

If you learn later that those assumptions were too optimistic or conservative, you can
update your plan. A flexible market analysis beats a flawless but imaginary one.

4. Competitor Stalking Is a Legitimate Skill

A surprisingly fun part of competitive analysis is “ethical stalking”
studying competitors’ websites, reviews, social media, and even physical locations.

When you read through customer reviews, patterns pop up quickly:

• “Love the product, hate the customer service.”
• “Great prices, but always out of stock.”
• “Coffee is good, but there’s nowhere to sit and work.”

Each complaint is an opportunity your business can address. In your market analysis,
highlight how your offering fills those gaps maybe with better support, more reliable
inventory, or a more comfortable environment.

5. Update Your Market Analysis Regularly

A common misconception is that the market analysis is something you write once to
satisfy a lender and then forget. In reality, your market will continue to evolve:

• New competitors enter or existing ones expand.
• Customer preferences shift (hello, new trends).
• Economic conditions change spending behavior.

Treat your market analysis as a living document. Revisit it at least once a year
or whenever you notice big shifts in sales, customer feedback, or competitor activity.
Updating it helps you adjust pricing, refine your target market, and explore new
opportunities before your competitors do.

6. Use Visuals to Make Your Story Stick

Founders often underestimate how powerful a simple chart or diagram can be. A single
graph showing steady industry growth or a pie chart explaining your market segments can
communicate your point faster than several paragraphs.

Visuals don’t have to be fancy. Even basic bar charts of projected customer growth or
a simple two-by-two matrix of competitors (price vs. quality, for example) makes your
business plan easier to understand and more memorable.

7. Connect the Dots to Your Strategy

Finally, the most effective market analyses do more than describe the world; they
explain what you’re going to do about it. Every insight should point toward a strategic
choice:

• If customers are price-sensitive, your pricing strategy should address that.
• If the market is crowded but growing, your positioning should highlight what makes you unique.
• If regulations make entry hard, emphasize how you’re prepared to handle them.

Think of your market analysis as the “why” behind the rest of your business plan.
Your marketing, sales, and operations sections should all feel like natural extensions
of the story you’ve told here.

Conclusion

Writing the market analysis section of a business plan
can seem intimidating at first, but it’s really about three things: understanding your
industry, knowing your customers, and being honest about your competition. With solid
research, clear structure, and a bit of personality, you can turn this section into one
of the strongest parts of your plan.

Whether you’re pitching investors, applying for a loan, or simply making sure your idea
holds up in the real world, a thoughtful market analysis gives you confidence. It doesn’t
guarantee success but it dramatically improves your odds and helps you make smarter
decisions as you build and grow your business.