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How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated April 17, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

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How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

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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

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.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
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Business Plan Economic Analysis – Don’t Overlook It!

Every small business operates in a number of different economies ranging from their neighborhood to worldwide. The health of these economies has a huge impact on the health of small businesses.

A business plan economic analysis should paint a picture of the economic environment your business will operate in. With many economic indicators, you can delve into further detail. Referencing information specific to small businesses in your state and industry helps to provide an even clearer context.

No, these indicators might not always paint a rosy picture. What they will do, however, is show that you’ve done your homework. That you, as an entrepreneur, understand your environment. You’ll show that you can plan around the threats you face and capitalize on the opportunities.

What to look for in a business plan economic analysis

Small business employer firms, proprietors’ income, small business job creation, business births vs. deaths, small business loan supply and demand, business lending.

• Small Business Loan Approval Rate

Loan Charge-Off and Delinquency Rates

If you were so inclined, you could probably draw a correlation between any economic indicator and the health of your small business.

Depending on your industry, the particular economic indicators that affect your small business will vary. Whether you’re retail, manufacturing, goods, or services will make a difference.

Inspiration for these indicators was taken from the Small Business Economic Bulletin . This document is published by the U.S. Small Business Administration. Supposedly on a quarterly basis. Though, the Bulletin linked above is the most recent one I could find. It’s over six months old as of this writing.

Anyhow, I’ll work with what I’ve got. The Bulletin is a jumping-off point for the agencies that compile these statistics. I’ve covered some of these agencies before .

For each indicator addressed in the Bulletin, I’ll discuss what it measures, why (I think) it matters, and how to use the information. In the end, I’ll also touch on what (if anything) each indicator might mean for my startup .

These data are just a jumping-off point. You’ll have to dig into it further to determine what it means for your business.

This indicator measures the number of small businesses that employ people.

It is derived from data maintained by the BLS. Specifically, a database named Business Employment Dynamics (BDM) .

Small business, for the purpose of this indicator, includes businesses with less than 500 employees. I think that includes a lot of businesses that would qualify as “mid-sized.” But, that’s just me.

An uptrend in the number of Small Business Employer Firms implies that the environment is ripe for small businesses to launch. A decline would imply the opposite.

Where possible, I always recommend digging down into regional or state information. Doing the same thing by industry is smart too. That way you get the most relevant economic statistics for your business.

In the BDM database, the best way I found to do this is by using the Multi-Screen option for data retrieval.

You’ll notice two pairs of similar phrases if you browse the BDM. These phrases are Openings / Closings and Births / Deaths . So, what’s the distinction? I sent an email to the SBA and a tweet to the BLS.

The BLS responded quickly with a link to this page . The language is a little hard to understand. However, I think that the main difference is that Openings / Closings can include seasonal businesses. Births/Deaths are considered permanent.

The SBA, predictably, didn’t respond.

It’s my guess that this indicator is a tally of Births/Deaths. Which makes sense. Including seasonal businesses in the tally would increase its volatility. Probably better to count businesses that permanently open and close.

This is the aggregate amount of income earned by the owners of small businesses.

Specifically, sole proprietorships, partnerships, and tax-exempt co-ops. Dividends aren’t included in this indicator. Neither is rental income (i.e. by a landlord).

Most businesses start off as a sole proprietorship ( Source ). Businesses that don’t pay the proprietor enough income – die. A healthy small business environment should translate into healthy growth in Proprietors’ Income .

What if Proprietors’ Income is flat (or declining), but Employer Firms are growing? That might imply that more firms (proprietors) are fighting over shrinking pieces of the pie. If this is happening in your industry, beware.

The best way I found to drill down is to look at the most current release of Personal Income by State . From there, you want to go to the Interactive Tables . Specifically, you want tables SQINC4 and SQINC5 for quarterly information. SAINC4 and SAINC5 for annual information.

Clicking on either of those should guide you to what you need. Remember, you can use Ctrl to select multiple options!

Job creation is a sign of growth. As customers demand more, help is needed to meet that demand.

It might come in the form of direct labor or administrative help.

Your small business may or may not follow suit. What this indicator tells us, though, is whether there is a net gain in small business jobs or not. If there is, that could be considered a tailwind. Not something that is going to guarantee success. But, not something you’re going to have to fight against either.

Here’s the flip side of that “good news” though. If small businesses (and the big boys) keep adding jobs, quarter after quarter, eventually you could reach a point where demand exceeds supply. The cost of labor goes up and (potentially) the quality goes down. For you, your suppliers, and maybe your customers.

Like Small Business Employment Firms , this indicator refers to the BDM database. Again, I suggest using the Multi-Screen Data Search to navigate it.

You can drill down by state if you choose to look at all industries and all sizes. However, some industry-specific searches can drill down by state too. I imagine it’s the bigger industries that allow for such a drill-down.

This indicator ties in directly with the Small Business Employer Firms . More Births than Deaths mean that the number of Employer Firms goes up. More Deaths than Births – down.

Once again, we refer to the BDM database. Breaking information down this way allows you to see how much of pull Births and/or Deaths are having on the number of Small Business Employer Firms . For example, is the number increasing because of more Births ? Or, because of fewer Deaths?

This is just further insight into the small business environment. It might be able to provide some clue as to how ripe it is for success.

When researching Establishment Births & Deaths you can isolate by industry. But, you’ll only get totals for the whole U.S. Conversely, when looking at all industries, you can narrow down by state.

This indicator measures the percentage of bankers that answered two questions in the affirmative or negative. The first question asks if banks have tightened or eased their standards on small business lending. The second question asks if the demand for small business loans has increased.

Now we shift gears a little. Away from small business employment, openings, closings, births, and deaths. The focus of the following four indicators is small business borrowing.

This indicator seems to be rather subjective. It comes from a quarterly publication by the Federal Reserve. This publication is called the Senior Loan Office Opinion Survey (SLOOS) on Bank Lending Practices .

Not a terribly objective measurement. More of “getting a feel for the room” statistic. It is just a survey, after all.

Beyond those two questions, though, there is a lot more in the SLOOS that measures bankers’ attitudes toward small business lending. Questions related to terms, collateral, covenants, and much more.

The lines on the chart seem to oscillate around 0. A negative would mean that the banker felt the opposite of what is being charted, I suppose. For example, a negative Banks Tightening figure means that more bankers answered that they were easing standards. A negative Reporting Stronger Demand line would mean that demand was weaker.

Anyhow, this indicator might provide insight into how many small businesses are seeking to employ financial leverage . Those insights can be compared with the indicators measuring expansion and contraction. If the small business environment seems ripe, but few are willing to leverage in this environment, then maybe the optimism about the future is shaky.

Don’t forget to check out the accompanying tables for a more quantifiable view of the data.

No industry or state-specific information seems to be available for this indicator.

This indicator compares small business loan volume to that of big business.

The Federal Deposit Insurance Corporation (FDIC) Quarterly Banking Profile is the source of this information.

Commercial and industrial loans to small businesses are measured. As are real estate loans under $1 million.

Like the Small Business Loan Supply and Demand indicator, I think this is indicative of small business owner optimism. If small business owners feel like the environment is good for investment, they are more likely to borrow. If they don’t feel like they can earn an adequate return for the risk, they will likely limit their exposure.

It’s wise to look at small business lending in several different ways. One indicator might tell you one thing. Another indicator – something else. When you get conflicting (credible) information you should investigate. You’ll hopefully come out the other end a shrewder businessperson.

Small Business Loan Approval Rates

This indicator provides valuable information two-fold. First, it gives you an idea of what the odds are of getting approved for a small business loan. Second, it breaks the approval rates down by the type of financial institution.

Granted, you don’t know the quality of the applicants measured by this indicator. That is something that would help to put this information into perspective. Are they startups or existing businesses? Maybe they aren’t adapting appropriately to changes in cash flow .

Big banks, small banks, credit unions, and alternative sources are measured. This might provide some insight as to where to go if your small business needs financing.

Unlike the other indicators, this one is more of a snapshot. Historical information is displayed. But only for the same month three and six years ago. It is not presented as a time series.

This gives you an idea of how well to prepare and where to focus your efforts when you need financing. If lenders are becoming more discerning, then you know that you’ll need to create a better business plan .

What you see in the Bulletin is pretty much all there is in the report itself. No state, industry, or size breakdown is provided.

This indicator gives you an idea of how effectively other businesses are employing their leverage.

Access the tables behind this indicator here.

Granted, it really only points out what percentage of businesses are doing poorly. It doesn’t say much about the upside. Only the downside.

The description of the report doesn’t outline exactly how the terms are defined.

My interpretation is that Delinquency means that one or more payments are late. Maybe even only by one day.

Charge-Off likely means that the bank has written off the loan against their reserves. They feel that payment for the remaining balance is extremely unlikely.

This serves as a lagging indicator for some of the others. I think the indicator it ties to best is Business Lending . If Business Lending is increasing, but Delinquency is level, we can assume that businesses are finding a good use for the borrowed money.

No state, size, or industry-specific information is available.

Business plan economic analysis for my startup

I don’t know if I’ll finance my startup with debt or equity. Therefore, I don’t know if the lending indicators are relevant to my business plan. If I plan on using debt financing, I can circle back and scrutinize the relevant indicators.

Right now, I don’t plan on hiring any employees. So the Small Business Job Creation indicator isn’t currently relevant either.

Of the remaining three indicators, two are somewhat redundant – Small Business Employer Firms and Business Births vs. Deaths .

I feel like the Business Births vs. Deaths indicator gives a little more insight. Let’s look at what it shows for my industry – Wholesale trade .

Not terribly encouraging. In 2014, Births fell below Deaths and seemed to stay there. This suggests, possibly, consolidation in the industry. Big, strong firms forcing out smaller, weaker ones.

What about Proprietors’ Income ?

More encouraging. Proprietors’ Income has risen sharply in my state since Q1 of 2016. Despite the title, the table doesn’t have a NAICS breakdown. But it doesn’t.

So, I don’t know the whole story. If this rise took place in my industry, I could assume that there’s plenty of money to be made. It’s just going to fewer hands. This means that I had better have a sound plan for success.

What other indicators should I have included in my business plan economic analysis?

Which indicators are important for your business plan economic analysis?

Join the conversation on Twitter !

How to Write the Market Analysis Section of a Business Plan

Written by Dave Lavinsky

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.  

How to Finish Your Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

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  

Other Helpful Business Planning Articles & Templates

What is economic analysis? Definition and examples

Economic Analysis involves assessing or examining topics or issues from an economist’s perspective. Economic analysis is the study of economic systems. It may also be a study of a production process or an industry. The analysis aims to determine how effectively the economy or something within it is operating. For example, an economic analysis of a company focuses mainly on how much profit it is making.

Economists say that economic analysis is a systematic approach to finding out what the optimum use of scarce resources is.

Economic analyses factor in the opportunity costs that people or companies employ. They measure, in monetary terms, what the benefits of a project are to the economy or community.

Opportunity cost is all about evaluating the option you gave up when you made a choice.

The Cambridge Dictionary has the following definitions of “economic analysis”:

“1. A study of an economy or group of economies, or these types of studies in general. 2. A study of the finances of a business, done especially in order to save money and reduce waste.”

Put simply; economic analysis is all about analyzing the economic aspects of something.

Apart from economists, statisticians and mathematicians may also carry out economic analyses.

According to the Asian Development Bank: “Economic analysis is a means to help bring about a better allocation of resources that can lead to enhanced incomes for investment or consumption purposes. Therefore, it is best undertaken at the early stages of the project cycle.

Economic analysis – methods

For companies, the goal of an economic analysis is to provide a clear picture of the current economic climate. Specifically, what the impact of the economic climate is or might be on the company’s ability to operate commercially.

In this context, ‘ economic climate ‘ means ‘ economic conditions ,’ i.e., the state of the overall economy .

The people conducting the analysis carry out an in-depth appraisal of the market’s strengths and weaknesses. They may choose from several different methods.

Cost/benefit analysis

This type of economic analysis tries to determine a project’s feasibility . Some people may refer to it as a feasibility study .

Those carrying out the study weigh its costs against its potential benefits.

A business may perform a cost-benefit analysis before, for example, purchasing four robots for the warehouse. Each robot can do the work of five human workers.

Currently, the business has 20 warehouse employees. They earn $30,000 per year each, i.e., they represent a total annual wage bill of $600,000.

Without factoring in wage increases and inflation, the business will have spent $6 million on warehouse staff over a 10-year period.

The robots cost $150,000 each. The price includes ten years of free maintenance. Therefore, the cost of automating the warehouse is $600,000.

The company must also employ a roboticist, whose salary is $50,000 per year.

Over a ten-year period, the cost of the robots plus the roboticist will be $600,000 + $500,000 = $1.1 million.

The company will save $4.9 million over that ten-year period if it replaces the human workers with robots.

It might save even more after that because nobody knows for certain how long the robots will last.

After looking at the cost/benefit analysis, the directors will probably decide to go ahead with the project.

Many sociologists and economists today warn that automation will soon take millions of human jobs . What will society be like in future if most people are unemployed?

The subject of automation is not only present in companies targeting manufacturing, it’s also quite present in service industries as well. For example, financial companies all over the world have been planning to re-adjust their operations departments.

Although companies can afford to have employees similar to the past, the reality of the modern markets has shifted so much towards a profit-oriented policy that employees are simply not a focus anymore

Cost/Effectiveness

In this type of analysis, we weigh a project’s effectiveness against its price. In this case, however, a low cost does not necessarily mean superior effectiveness.

Using the same ‘warehouse and robots’ scenario, researchers have also determined that human workers are better at spotting defects.

The warehouse workers’ duties do not include checking the quality of the goods. However, they often identify faults and report them.

The company addresses the defects before shipping out the products.

The cost/effectiveness analysis finds that losing this fault detection feature might cost more than $4.9 million over a decade.

The company will probably lose some dissatisfied customers. Additionally, fixing defects after delivering products is much more expensive than doing so beforehand.

After reading the cost-effectiveness analysis, the directors may halt the project. Perhaps one of them may suggest purchasing the robots but keeping on one or two human workers.

Cost/benefit and cost/effectiveness analyses are just two of several types of economic analyses.

These methods, along with others like risk assessment and environmental impact studies, provide a comprehensive view for economic decision-making.

These analyses methods contribute to the economic assumptions that economists make when they create economic models.

These two educational videos come from our sister channel on YouTube – Marketing Business Network . Using easy-to-understand vocabulary and examples, they explain what “Economic Analysis” and “Increasing Opportunity Cost” mean.

What is Economic Analysis?

What is Increasing Opportunity Cost?

Share this:

• Renewable Energy
• Artificial Intelligence
• 3D Printing
• Financial Glossary

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 .

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.

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.

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.

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.

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.

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 do a market analysis for a business plan

A key part of any business plan is market analysis. This section needs to demonstrate both your expertise in your particular market and the attractiveness of the market from a financial standpoint.

This article first looks at what we mean exactly by market analysis before looking at how to make a good one for your business plan.

What is a market analysis?

A market analysis is a quantitative and qualitative assessment of a market. It looks into the size of the market both in volume and in value, the various customer segments and buying patterns, the competition, and the economic environment in terms of barriers to entry and regulation.

How to do a market analysis?

The objectives of the market analysis section of a business plan are to show to investors that:

• you know your market
• the market is large enough to build a sustainable business

In order to do that I recommend the following plan:

Demographics and Segmentation

Target market, market need, competition, barriers to entry.

The first step of the analysis consists in assessing the size of the market.

When assessing the size of the market, your approach will depend on the type of business you are selling to investors. If your business plan is for a small shop or a restaurant then you need to take a local approach and try to assess the market around your shop. If you are writing a business plan for a restaurant chain then you need to assess the market a national level.

Depending on your market you might also want to slice it into different segments. This is especially relevant if you or your competitors focus only on certain segments.

Volume & Value

There are two factors you need to look at when assessing the size of a market: the number of potential customers and the value of the market. It is very important to look at both numbers separately, let's take an example to understand why.

Imagine that you have the opportunity to open a shop either in Town A or in Town B:

Although Town B looks more competitive (10 competitors vs. 2 in Town A) and a smaller opportunity (market size of £100m vs. £200 in Town A), with 1,000 potential customers it is actually a more accessible market than Town A where you have only 2 potential customers.

Potential customer?

The definition of a potential customer will depend on your type of business. For example, if you are opening a small shop selling office furniture then your market will be all the companies within your delivery range. As in the example above it is likely that most companies would have only one person in charge of purchasing furniture hence you wouldn't take the size of these businesses in consideration when assessing the number of potential customers. You would however factor it when assessing the value of the market.

Market value

Estimating the market value is often more difficult than assessing the number of potential customers. The first thing to do is to see if the figure is publicly available as either published by a consultancy firm or by a state body. It is very likely that you will find at least a number on a national level.

If not then you can either buy some market research or try to estimate it yourself.

Methods for building an estimate

There are 2 methods that can be used to build estimates: the bottom-up approach or the top-down approach.

The bottom-up approach consists in building a global number starting with unitary values. In our case the number of potential clients multiplied by an average transaction value.

Let's keep our office furniture example and try to estimate the value of the 'desk' segment. We would first factor in the size of the businesses in our delivery range in order to come up with the size of the desks park. Then we would try to estimate the renewal rate of the park to get the volume of annual transactions. Finally, we would apply an average price to the annual volume of transactions to get to the estimated market value.

Here is a summary of the steps including where to find the information:

• Size of desks park = number of businesses in delivery area x number of employees (you might want to refine this number based on the sector as not all employees have desks)
• Renewal rate = 1 / useful life of a desk
• The volume of transactions = size of desks park x renewal rate
• Value of 1 transaction = average price of a desk
• Market value = volume of transactions x value of 1 transaction

You should be able to find most of the information for free in this example. You can get the number and size of businesses in your delivery area from the national statistics. Your accountant should be able to give you the useful life of a desk (but you should know it since it is your market!). You can compare the desk prices of other furniture stores in your area. As a side note here: it is always a good idea to ask your competitors for market data (just don't say you are going to compete with them).

That was the bottom-up approach, now let's look into the top-down approach.

The top-down approach consists of starting with a global number and reducing it pro-rata. In our case, we would start with the value of the UK office furniture market which AMA Research estimates to be around £650m and then do a pro-rata on this number using the number of businesses in our delivery area x their number of employees / total number of people employed in the UK. Once again the number of employees would only be a rough proxy given all business don't have the same furniture requirements.

When coming up with an estimate yourself it is always a good practice to test both the bottom up and top-down approaches and to compare the results. If the numbers are too far away then you probably missed something or used the wrong proxy.

Once you have estimated the market size you need to explain to your reader which segment(s) of the market you view as your target market.

The target market is the type of customers you target within the market. For example, if you are selling jewellery you can either be a generalist or decide to focus on the high end or the lower end of the market. This section is relevant when your market has clear segments with different drivers of demand. In my example of jewels, value for money would be one of the drivers of the lower end market whereas exclusivity and prestige would drive the high end.

Now it is time to focus on the more qualitative side of the market analysis by looking at what drives the demand.

This section is very important as it is where you show your potential investor that you have an intimate knowledge of your market. You know why they buy!

Here you need to get into the details of the drivers of demand for your product or services. One way to look at what a driver is to look at takeaway coffee. One of the drivers for coffee is consistency. The coffee one buys in a chain is not necessarily better than the one from the independent coffee shop next door. But if you are not from the area then you don't know what the independent coffee shop's coffee is worth it. Whereas you know that the coffee from the chain will taste just like in every other shop of this chain. Hence most people on the move buy coffee from chains rather than independent coffee shops.

From a tactical point of view, this section is also where you need to place your competitive edge without mentioning it explicitly. In the following sections of your business plan, you are going to talk about your competition and their strengths, weaknesses and market positioning before reaching the Strategy section in which you'll explain your own market positioning. What you want to do is prepare the reader to embrace your positioning and invest in your company.

To do so you need to highlight in this section some of the drivers that your competition has not been focussing on. A quick example for an independent coffee shop surrounded by coffee chains would be to say that on top of consistency, which is relevant for people on the move, another driver for coffee shop demand is the place itself as what coffee shops sell before most is a place for people to meet. You would then present your competition. And in the Strategy section explain that you will focus on locals looking for a place to meet rather than takeaway coffee and that your differentiating factor will be the authenticity and atmosphere of your local shop.

The aim of this section is to give a fair view of who you are competing against. You need to explain your competitors' positioning and describe their strengths and weaknesses. You should write this part in parallel with the Competitive Edge part of the Strategy section.

The idea here is to analyse your competitor's angle to the market in order to find a weakness that your company will be able to use in its own market positioning.

One way to carry the analysis is to benchmark your competitor against each of the key drivers of demand for your market (price, quality, add-on services, etc.) and present the results in a table.

Below is an example of a furniture shop in France. As you can see from the table all the actors on the market are currently focused on the low medium range of the market leaving the space free for a high end focused new player.

This section is all about answering two questions from your investors:

• what prevents someone from opening a shop in front of yours and take 50% of your business?
• having answered the previous question what makes you think you will be successful in trying to enter this market? (start-up only)

As you would have guess barriers to entry are great. Investors love them and there is one reason for this: it protects your business from new competition!

Here are a few examples of barriers to entry:

• Investment (a project that requires a substantial investment)
• Technology (sophisticated technology a website is not one, knowing how to process uranium is)
• Brand (the huge marketing costs required to get to a certain level of recognition)
• Regulation (licences and concessions in particular)
• Access to resources (exclusivity with suppliers, proprietary resources)
• Access to distribution channels (exclusivity with distributors, proprietary network)
• Location (a shop on Regent's Street)

The answer to the questions above will be highly dependent on your type of business, your management team and any relations it might have. Therefore it is hard for me to give any general tips about it.

If regulation is a barrier at entry in your sector then I would advise you to merge this section with the previous one. Otherwise, this section should be just a tick the box exercise where you explain the main regulations applicable to your business and which steps you are going to take to remain compliant.

Now you know how to do a market analysis for a business plan! I hope you found this article useful. If so please share it, and if not let us know what we need to improve.

Also on The Business Plan Shop

• Free business plan template to download
• TAM SAM SOM, what it means and why it matters
• Business model vs business plan
• What is a business plan and how to create one?

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

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Create an Economic Analysis for Your Business Opportunities

1. the purpose of economic analysis, 2. the benefits of economic analysis, 3. conducting an economic analysis, 4. how to analyze business opportunities, 5. the different types of economic analyses, 6. the importance of data in economic analysis, 7. tools for conducting an economic analysis.

Economic analysis is a process used to evaluate the potential outcomes of a business opportunity or investment . The purpose of economic analysis is to identify the costs and benefits of the proposed venture, and to assess whether or not the benefits outweigh the costs.

There are two primary types of economic analysis: cost-benefit analysis and cost-effectiveness analysis. cost-benefit analysis weighs the costs and benefits of the proposed venture in order to determine whether or not the project is worth pursuing. cost-effectiveness analysis , on the other hand, compares the costs and benefits of the proposed venture to those of alternative projects in order to determine which option is the most efficient.

Regardless of which type of economic analysis is used, there are certain steps that must be followed in order to ensure that the process is conducted correctly. First, the decision-maker must identify all of the relevant costs and benefits associated with the proposed venture. Next, these costs and benefits must be quantified in monetary terms. Finally, a comparison must be made between the costs and benefits in order to reach a conclusion about the feasibility of the project.

The process of economic analysis can be complex, but it is an essential tool for any business decision-maker. By taking the time to carefully consider all of the potential costs and benefits associated with a proposed venture, businesses can increase their chances of success and avoid making costly mistakes .

Economic analysis is a process businesses use to assess the feasibility of investments or other projects. The analysis measures the costs and benefits of a proposed project to determine whether it is worth undertaking.

There are many benefits to conducting an economic analysis prior to making a business decision. The analysis can provide insights into the potential profitability of a project and help businesses to make informed decisions about where to allocate their resources.

An economic analysis can also help businesses to avoid making costly mistakes by identifying risks and uncertainties associated with a proposed project. By considering all of the potential costs and benefits of a project , businesses can make more informed decisions about whether or not to proceed.

In addition to providing valuable insights, an economic analysis can also help businesses to negotiate better terms with suppliers and other partners. By understanding the full costs and benefits of a project, businesses can be in a stronger position to bargain for favorable terms.

Overall, an economic analysis is a valuable tool that can help businesses to make informed decisions about investments and other projects. The benefits of conducting an economic analysis typically outweigh the costs, making it an essential part of any business decision-making process .

When conducting an economic analysis for your business opportunities, there are a few key things to keep in mind . First, you'll want to identify the opportunity cost of your project. This is the potential revenue or savings that could be generated if you choose to pursue a certain course of action. For example, if you're considering investing in a new piece of equipment, you'll want to calculate the cost of the equipment, the installation costs, and the ongoing maintenance costs. You'll also want to consider the opportunity cost of not pursuing the project, which could include lost revenue or increased costs.

Next, you'll want to consider the risks and benefits associated with your project. What are the potential risks involved? What are the potential benefits? How likely are each of these outcomes to occur? You'll want to weigh the risks and benefits carefully before deciding whether or not to pursue a certain course of action.

Finally, you'll want to consider the feasibility of your project. Is it realistically possible to achieve the desired outcome ? Do you have the resources and expertise necessary to make it happen? Will it require significant upfront investment? These are all important factors to consider when evaluating a business opportunity.

By taking the time to conduct a thorough economic analysis, you can make sure that you're making well-informed decisions about your business opportunities. This will help you maximize your chances of success and avoid costly mistakes .

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As a small business owner , you are always looking for new opportunities to grow your business . But with so many options out there, it can be difficult to know which opportunities are worth Pursuing.

That's where an economic analysis comes in. An economic analysis is a tool that can help you evaluate business opportunities and make sound decisions about which ones to pursue.

There are several factors you'll need to consider when conducting an economic analysis. First, you'll need to identify the opportunity cost of pursuing the opportunity. This is the cost of not pursuing other opportunities. For example, if you're considering opening a new store, the opportunity cost might be the revenue you would have generated by expanding your existing store instead.

Next, you'll need to consider the sunk costs of the opportunity . These are costs that have already been incurred and cannot be recovered , such as the cost of leasehold improvements or inventory.

Finally, you'll need to estimate the potential revenue and profit of the opportunity. This can be tricky, but there are a number of ways to do it. You might want to consult with an accountant or financial advisor to get an accurate estimate.

Once you've considered all of these factors, you can use them to make a decision about whether or not to pursue the opportunity. If the opportunity looks promising, go for it! But if the costs seem too high or the revenue potential is too low, it might be best to pass on the opportunity.

Conducting an economic analysis is a great way to evaluate business opportunities and make sound decisions about which ones to pursue. By taking the time to do this analysis up front, you can save yourself a lot of time and money in the long run.

There are four different types of economic analyses that businesses use to help them make decisions about opportunities: cost-benefit analysis, cost-effectiveness analysis, break-even analysis, and sunk cost analysis .

1. Cost-Benefit Analysis

A cost-benefit analysis is used to compare the expected costs of an opportunity with the expected benefits. The benefits can be measured in financial terms, or in terms of other benefits such as improved customer satisfaction or reduced environmental impact.

To carry out a cost-benefit analysis, you will need to estimate the future costs and benefits of the opportunity over a period of time. This can be difficult to do, and there is always some uncertainty involved. However, a cost-benefit analysis is a useful tool for comparing different opportunities and for making decisions about whether to go ahead with an opportunity.

2. Cost-Effectiveness Analysis

A cost-effectiveness analysis is used to compare the expected costs of an opportunity with the expected benefits, measured in terms of a common unit such as dollars. This type of analysis is often used when the benefits of an opportunity cannot be easily measured in financial terms.

To carry out a cost-effectiveness analysis, you will need to estimate the future costs and benefits of the opportunity over a period of time. You will also need to choose a common unit in which to measure the benefits (such as dollars). This can be difficult to do, and there is always some uncertainty involved. However, a cost-effectiveness analysis is a useful tool for comparing different opportunities.

3. Break-Even Analysis

A break-even analysis is used to calculate the point at which the expected costs of an opportunity are equal to the expected benefits. This point is known as the break-even point .

To carry out a break-even analysis, you will need to estimate the future costs and benefits of the opportunity over a period of time. You will also need to choose a common unit in which to measure the benefits (such as dollars). This can be difficult to do, and there is always some uncertainty involved. However, a break-even analysis can be a useful tool for deciding whether or not to go ahead with an opportunity.

4. Sunk Cost Analysis

A sunk cost is a cost that has already been incurred and cannot be recovered . A sunk cost analysis is used to compare the expected future costs of an opportunity with the sunk costs that have already been incurred .

To carry out a sunk cost analysis, you will need to estimate the future costs and benefits of the opportunity over a period of time. You will also need to identify the sunk costs that have already been incurred. This can be difficult to do, and there is always some uncertainty involved. However, a sunk cost analysis can be a useful tool for deciding whether or not to go ahead with an opportunity.

The Different Types of Economic Analyses - Create an Economic Analysis for Your Business Opportunities

The heart of any economic analysis is data . This data comes in many forms, including financial data, market data, and data about the competition. Without good data, it's impossible to make sound decisions about where to allocate resources and how to grow your business .

There are a few things to keep in mind when gathering data for your economic analysis. First, you need to make sure that the data is accurate. This means using reliable sources and double-checking your figures. Second, you need to ensure that the data is relevant. This means using data that is recent and relevant to your business and your industry. Finally, you need to make sure that the data is complete. This means considering all of the factors that could impact your business and your industry.

Once you have gathered all of the data you need, you can begin to analyze it. There are a number of different ways to do this, but one of the most common is to create charts and graphs. This will help you to see trends and patterns in the data . Once you have identified these trends, you can begin to make decisions about where to allocate resources and how to grow your business.

The data you collect for your economic analysis is only as good as the decisions you make with it. That's why it's so important to use sound judgment when interpreting the data. Remember, your goal is to make decisions that will help your business grow and thrive. With that in mind, don't be afraid to seek out expert advice when necessary. A good economist can help you to understand the data and make sound decisions about where to allocate resources and how to grow your business.

There are many tools available to help you conduct an economic analysis of your business opportunities . The most important tool is your own knowledge and understanding of economics. However, there are also a number of software programs and online resources that can help you with your analysis.

One of the most important things to remember when conducting an economic analysis is to think about the long-term effects of your decisions. This is especially important when you are making investment decisions . It is easy to get caught up in the short-term gains that you may see from an investment, but you need to consider how that investment will perform over the long term.

Another important thing to remember is to think about the risks and rewards of your decisions. Every decision you make has both risks and rewards. You need to carefully consider both before making a decision.

Once you have a good understanding of the basics of economic analysis , there are a number of software programs that can help you with your analysis. These programs can help you with everything from creating charts and graphs to performing more complex economic analyses.

The most important thing to remember when conducting an economic analysis is to use the tools that are available to you to make the best decisions possible. With a little knowledge and effort, you can make sound economic decisions that will help your business grow and prosper.

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Economic analysis for business decisions, course description.

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BEA is an independent, principal federal statistical agency that promotes a better understanding of the U.S. economy by providing timely, relevant, and accurate economic accounts data in an objective and cost-effective manner. Although a relatively small agency, BEA produces some of the most closely watched and influential economic indicators , such as gross domestic product (GDP) and the trade balance, that directly affect decisions made by policy makers, business leaders, and the American public.

BEA’s national, industry, regional, and international economic accounts present valuable information on U.S. economic growth, regional economic development, interindustry relationships, and the Nation's position in the world economy. Some of the widely used statistical measures produced by BEA include GDP, personal income and outlays, corporate profits, GDP by state and by metropolitan area, balance of payments, and GDP by industry. These statistics are used by federal, state, and local governments for budget development and projections; by the Federal Reserve for monetary policy; by the business sector for planning and investment; and by the American public to follow and understand the performance of the nation’s economy.

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Business Information Guide

• Articles and News
• Books/eBooks
• Business Case Studies
• Career Research This link opens in a new window
• Company Research
• Data and Demographics
• Evaluate and Cite Your Sources
• Industry Research
• Market Research

Introduction

I. the company, concept, and product(s) or service(s), ii. the industry analysis, iii. market research & analysis, iv. economics of the business, v. the marketing plan, vi. design & development plan, vii. operations plan, viii. management team, ix. overall schedule, x. critical risks, problems and assumptions, xi. financial plan, xii. proposed company offering.

• Organizational Behavior
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The recommendations and resources on this page complement the Whitman School of Management's Nuts and Bolts of Great Business Plans , which was written by Department of Entrepreneurship and Emerging Enterprises . The sections on this page correspond to the Nuts and Bolts of Great Business Plan sections.

Nearly every part of your business plan will require some type of research. Since gathering and analyzing the amount of information and data this assignment requires can be time consuming, be sure to plan your time accordingly. These recommendations and resources are just starting points. Be prepared to gather information and data from many different sources as you research and put together your business plan.

The following video tutorials were developed to provide a refresher on general research and business research strategies. The four business research video tutorials, in particular, were developed by Business, Management and Entrepreneurship Librarian Stephanie JH McReynolds to support EEE 457 students in the development of Capstone business plans.

• Video Tutorials for General and Business Research General Research Video Tutorials Include: "Research Starting Points," "Searching with Summon," "Finding Journal Articles." Business Research Video Tutorials Include: "Industry Research Part 1: Identifying Industry Codes," "Industry Research Part 2: Discovering Industry Research Reports and Data," "Company Research," "Market Research Resources."

First outline the nature of the entity you plan to create and where you are in that process, then capture the essence of your business concept and explain that concept, then detail the products and services you anticipate selling, and then talk about your entry approach and your vision for growth over the next five years.

As you draft your idea, use the resources on the Article and News page of the Business Information Guide to explore trends and relevant company, industry, and product news and analysis. Refer to the resources on the Company Research page of the Business Information Guide to become familiar with other companies offering similar products or services.

The "industry" refers to the larger landscape, as in the "computer hardware wholesale trade industry" or the "card and gift industry" or the "architectural services industry." The focus here is on what is happening in the industry and on the relative attractiveness of the industry as a whole.

Refer to the Industry Research page of the Business Information Guide for recommendations and guidance.

This section should convince the reader or investor that you truly know your customers. It should convince the reader that your product or service a) solves a customer need that customers want solved; b) will have a substantial market in a growing industry; and c) can achieve sales in the face of competition. For example, the predicted sales levels directly influence such factors as the size of the manufacturing operation, the marketing plan, and the amount of debt and equity capital you will require. Yet most entrepreneurs seem to have great difficulty preparing and presenting market research and analyses that show that their ventures' sales estimates are sound and attainable. Consult industry publications, articles in trade magazines and trade associations to understand how the industry defines, identifies and segments its customers. Then apply yourself creatively by integrating the information in a unique way.

Explore resources on the Business Information Guide for Market Research , Data & Demographics , and Articles and News .

The economics of the business is the section addressing the basic logic of how profits are earned in your business as well as the sales level required to breakeven. Two companies in the same industry might make profit in very different ways. Will this be a high margin, low volume business with low fixed costs? Will it be a low margin, high volume business where the cost structure is predominantly variable? The story begins by identifying your sources of revenue and how much margin you make on each of them.

Explore  Company Research resources on the Business Information Guide to find revenue and expenses of similar companies. Find industry ratios (such as profit/loss ratio by sales class) in Industry Research resources, such as Bizminer.

The Marketing Plan describes how your projected sales will actually be attained. How will you make sales actually happen? A great idea is meaningless if you cannot find customers. Thus, this section builds on the Market Section, where you defined your market and outlined your targeted segments and their buyer behavior. The marketing plan needs to provide detail on the overall marketing strategy that will exploit the opportunity and your competitive advantages. Include a discussion of sales and service policies, pricing, distribution, promotion and advertising strategies, and sales projections. The marketing plan needs to describe what is to be done, how it will be done, when it will be done, and who will do it.

Explore resources on the Business Information Guide for Market Research , Data & Demographics , and Articles and News . Find books on marketing strategy via Summon and the Classic Catalog .

Articles and News Search Tips:

Pay close attention to the words and terms in this section from The Nuts and Bolts of Great Business Plans. These words can be useful search terms. For example, sales and service policies, pricing, distribution, promotion, advertising strategies, and sales projections. As you review your search results, pay particular attention to the words and phrases in the keywords and subject terms of the article records, as these can yield additional search terms.

A basic search for marketing and strategy and (your product or concept term) can also yield relevant results. The databases will also suggest additional terms to use in your search, such as market research AND strategy, advertising agencies, advertising campaigns, marketing management, market research, marketing agreements for you to explore.

This is a very important section for those teams developing a non-existent product, doing research and development, having technical obstacles to overcome, or seeking patent or copyright protection. However, if you are in a business where research and development is not a major issue (e.g., retailing, many consumer services), then you can leave this section out and just address and technologies you plan to employ in the OPERATIONS section.

The nature and extent of any design and development work, and the time and money required before the product or service is marketable, need to be considered in detail. (Note that design and development costs are often underestimated.) Design and development might be the engineering work necessary to convert a laboratory prototype to a finished product; the design of special tooling; the work of an industrial designer to make a product more attractive and saleable; or the identification and organization of employees, equipment, and special techniques, such as the equipment, new computer software, and skills required for computerized credit checking, to implement a service business.

Refer to the Patents & Intellectual Property guide for resources and research tips.

The operations section outlines how you will run your business and deliver value to your customers. Operations is defined as the processes that deliver your products/services to a customer or user and can include the production process for delivering your service to a given customer, manufacturing process if you are a manufacturer, transportation, logistics, travel, printing, consulting, and after-sales service. It also includes such factors as plant location, the type of facilities needed, space requirements, internal processes, capital equipment requirements, and labor force (both full- and part-time) requirements.

Explore resources on the Business Information Guide for Market Research , Data & Demographics , and Articles and News . For the geographic subsection, the mapping features of some Company Research databases (such as Data Axle Reference Solutions) and the mapping feature, or geographic limiters, available in certain Market Research resources (such as SimplyAnalytics) may be especially useful. To help identify suppliers, explore Thomasnet.com .

This section of the business plan includes a description of the functions that will need to be filled, a description of the key management personnel and their primary duties, an outline of the organizational structure for the venture, a description of the board of directors and key advisors, a description of the ownership position of any other investors, and so forth. You need to present indications of commitment, such as the willingness of team members to initially accept modest salaries, and of the existence of the proper balance of technical, managerial, and business skills and experience in doing what is proposed.

Find articles on building your management team and board of directors with databases on the Articles and News page of the Business Information Guide. Explore the Career Research Guide for relevant information, such as salary research resources.

A graphical schedule that shows the timing and interrelationship of the major events necessary to launch the venture and realize its objectives is an essential part of a business plan. The underlying cash conversion and operating cycle of the business will provide key inputs for the schedule. In addition to being a planning aid by showing deadlines critical to a venture's success, a well-presented schedule can be extremely valuable in convincing potential investors that the management team is able to plan for venture growth in a way that recognizes obstacles and minimizes investor risk. Since the time necessary to do things tends to be underestimated in most business plans, it is important to demonstrate that you have correctly estimated these amounts in determining the schedule.

• Gantt Charts as Planning Tools Part of Project Management Tools tutorial from Boston University.
• How to Use a PERT Chart for Project Planning Project planning overview from the Motley Fool.

The development of a business has risks and problems, and the business plan invariably contains some implicit assumptions about these issues. You need to include a description of the risks and the consequences of adverse outcomes relating to your industry, your company and its personnel, your product's market appeal, and the timing and financing of your startup. Be sure to discuss assumptions concerning sales projections, customer orders, and so forth. If the venture has anything that could be considered a fatal flaw, discuss why you do not see it as a problem or how you intend to overcome it. The discovery of any unstated negative factors by potential investors can undermine the credibility of the venture and endanger its financing. Be aware that most investors will read the section describing the management team first and then this section.

To inform this section, explore resources on the Business Information Guide for  Market Research ,  Data & Demographics , Company Research ,  Industry Research ,and  Articles and News .

This section lays out a picture of the financial performance of the firm as it is started, stabilizes and grows. The financial plan is basic to the evaluation of an investment opportunity and needs to represent your best estimates of financial requirements. The purpose of the financial plan is to indicate the venture’s potential and to present a timetable for financial viability. It also can serve as an operating plan for financial management using financial benchmarks. In preparing the financial plan, look creatively at the venture and think about bootstrapping techniques, especially in the early days.

Explore  Company Research  resources (such as PrivCo, which includes venture capital financial data, and Mergent Online, which includes 10-K reports) on the Business Information Guide to find revenue and expenses of similar companies. Find industry ratios (such as profit/loss ratio by sales class) in  Industry Research  resources, such as Bizminer.

• Beginners' Guide to Financial Statements Guide to financial statements from the SEC.
• Business Startup Financing Startup financing guidance from BizFilings, part of Wolters Kluwer.
• Financial Statement Analysis: The Basics for Non-Accountants Guide to financial statement analysis from Harvard Business School.
• Preparing Financial Business Statements Guide to preparing financial statements from BizFilings, part of Wolters Kluwer.

The purpose of this section of the plan is to indicate the amount of any money that is being sought, the nature and amount of the securities offered to the investor, a brief description of the uses that will be made of the capital revised, and a summary of how the investor is expected to achieve its targeted rate of return. It is important to realize the terms for financing your company that you propose here are only the first step in the negotiation process with those interested in investing, and it is very possible that your financing will involve different kinds of securities than originally proposed.

Discover relevant articles with the resources on the  Article and News  page of the   Business Information Guide.

• A Beginner’s Guide to Startup Valuation Overview of startup valuation
• Business Calculators Business Calculators recommended by the Motley Fool.
• How Much Is Your Slice of That Unicorn Really Worth? Stanford Business article on how to determine startup shares value. Includes link to free online calculator to help estimate the worth of startup shares.
• How to Value Private Companies Overview from Investopedia on how private companies are valued.
• “Valuing the Business” Chapter from eBook Creating Services and Products Overview of business valuation methods for entrepreneurs.
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Economic Analysis for Business

by Catherine Capozzi

Published on 26 Sep 2017

An economic analysis is like performing a check-up on a business: it assesses internal conditions, external influences and provides recommendations for improvement. Stephen Morris, Nancy Devlin and David Parkin, authors of “Economic Analysis in Health Care,” explain that this type of an analysis weighs decision-making in terms of its potential benefits or disadvantages. The ultimate goal of an economic analysis is to determine if a business is allocating their resources in the most effective manner. In most cases, a business always has room for improvement, be it through overhauling outdated computers or improving the delivery ordering system.

Identification

An internal staff member can perform an economic analysis, though hiring a consultant to provide an outsider’s view of the organization tends to be a more common approach. If a consultant is hired to give a review, she may spend months observing how the company functions. At the end of it, she drafts a report and delivers it either orally in front of the company management team or submits an extensive written evaluation. The analysis highlights the areas for improvement with regards to efficiency and what hurdles the organization might have to overcome from external economic conditions.

Internal Conditions

An economic analysis interprets internal economic conditions facing the company. The economic goal of an organization is to maximize its output and efficiency given its constraints. Internal economic conditions affecting an organization include the quality of its labor force, machinery, capital and innovation. Common constraints include adhering to a budget and drawing from a limited labor pool. For instance, a company is not being economical by hiring MBA graduates and paying them a high salary for work that could be performed by a high school graduate for significantly less money. Similarly, hiring too many unskilled workers will inhibit growth in the long run due to a lack of innovation. An economic analysis might also reveal the company should pay to upgrade its machinery or computer systems. Such a recommendation is made after assessing the level of output, expected consumer demand and the potential profit derived from having higher-caliber machinery.

External Conditions

External conditions include the effects of the overall economic climate, changes in technology, presence of competition and globalization. Each of these factors affects the performance and long-term well-being of the company. Hal Root and Steve Koenig, authors of “The Small Business Start-Up Guide,” explain that legal issues and growth trends in the industry are other examples of factors to consider. A downturn economy decreases consumer confidence and could decrease profits. Changes in technology could render a product line of the company obsolete, as was the case for companies manufacturing cassette tapes, for example. An economic analysis pinpoints which of these external conditions pose the biggest threat to the corporation and how the company should best prepare for these impending changes.

Recommendations

The bulk of an economic analysis is the recommendations section. In it, the person advises which tangible steps the company can take to improve its operations. These recommendations are justified with the use of graphs, equations, statistical forecasting models and flowcharts. This section also explains how to implement these recommendations by listing training requirements, possible vendors who can provide better products and the expected labor requirements to accommodate the changes.

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Local election results: Labour admits Gaza a factor in some council election losses - as senior Tory says London mayor result 'might be tight'

The Tories suffer some historic losses in Thursday's local elections, while Labour admit the party's stance on Gaza was "obviously" a factor in its failure to record more wins. Meanwhile, a Conservative minister says he has heard suggestions the London mayoral race "might be tight".

Friday 3 May 2024 20:53, UK

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• Watch and follow the Politics Hub With Sophy Ridge, live
• Labour shadow minister says 'we need to reflect' over Gaza stance 
• Labour wins mayoralty in PM's own backyard
• Relief for PM as Tory mayor clings on in key race
• But Sunak admits overall results are 'disappointing'
• Tories could be 'almost annihilated' at general election
• Starmer hails Labour wins - but admits Gaza cost him votes
• And party fears possible result to come in London mayoral contest
• Vote 2024: Council results in full  | Mayoral results as they happen  | Labour will fail to gain overall majority based on council election results - projection
• Live reporting by Katie Williams , Emily Mee , and (earlier) Andy Hayes and  Ben Bloch

Labour MPs are more confident this evening that Sadiq Khan has "squeaked" the London mayoral election after rumours swirled that he was on track to lose to Tory candidate Susan Hall, says our  deputy political editor Sam Coates .

Figures close to Ms Hall earlier said she was in with a chance of being announced winner during tomorrow's result, with the suggestion "rattling around " all day.

But Sam says there's been a "shift" in the wake of the turnout results being published (more on that in our 20.13 post).

"Both Labour and key Conservative MPs now do think Sadiq Khan will have squeaked it tomorrow," he says.

"There are a lot fewer jitters than there were a few hours ago."

A Labour MP has said there is "no doubt at all" the party's stance on Gaza has made some voters switch away. 

Clive Betts said people in his constituency had told him "very clearly" this was the case.

In one of the wards in his Sheffield South East constituency, which is usually one of Labour's safest, an independent councillor was elected "solely on the issue of Gaza", he says. 

"People voted on the basis they were not happy with Labour, not happy with its position on Gaza," he says.

"A lot of that was mistaken that we haven't changed our position on Gaza, but once people take a view that we've got it wrong, it's very difficult to change their minds."

He says Labour must "make it clear what Israel is doing in Gaza now is unacceptable" and if in government it should take sanctions against Israel if necessary and recognise a Palestinian state. 

While it hasn't enjoyed any thumping victories, Reform UK has proved "one of the most consequential" aspects of the election results for the Conservatives, says our deputy political editor Sam Coates .

The party has turned from a "polling phenomena into something that clearly takes votes from the Tories", he says.

Sam says the vote in the Blackpool by-election, where the Reform candidate came just 117 votes behind the second-place Tory candidate, indicates Reform will "eat into seats" in the next general election.

He points to 2019, when Boris Johnson won a huge majority after persuading the Brexit Party - the forerunner to Reform UK - to stand aside in key seats. The Tories will likely put "enormous pressure" on Reform UK to do the same thing, Sam notes.

But as it stands, Richard Tice's party is planning to stand in nearly every single seat in Great Britain this year, he says.

"That's why Reform is a really big issue."

Now Sophy Ridge wants to know whether Reform UK's "missing ingredient" is Nigel Farage, and asks if he is expected to return to frontline politics.

Richard Tice says they are "very good friends" and that Mr Farage "has got a big decision to make". 

He says the "more help Nigel can give, the better" and there is "no 'I' in 'team'". 

Mr Tice says Mr Farage is "the most famous politician in the country". 

Asked whether the former UKIP leader would want to come back, Mr Tice says: "Let's wait and see."

Reform UK leader Richard Tice is next up on the programme, and says he is "delighted" by his party's election results. 

He says his party had its "strongest by-election result by some margin" and is starting to win council seats. 

But Sophy Ridge points out that UKIP had outpolled Reform UK at local elections, and yet still wasn't able to win a seat in Westminster. 

She argues Reform UK will not get the cut-through when it comes to the general election. 

Mr Tice says this is "completely wrong" and the Tories are "facing annihilation". 

"We have two forms of socialism in the two main parties - there's no difference between the two of them," he says. 

Sophy asks whether he believes Rishi Sunak is a socialist, and he says it is "literally the definition" of socialism to raise taxes and spending. 

Reform UK has picked up two seats in Havant, but has not won any councils. 

In the Blackpool South by-election, the party came close to the Conservatives - taking 16.8% of the vote and coming just 117 votes behind the second-placed Tory candidate.

Voter turnout figures for the London mayoral election - one of the most closely watched - have landed this evening. 

Some 40.5% of the capital's electorate headed to polling stations to cast their vote, according to data from London Elects. 

The figure is down 1.5% on the 2021 turnout. 

The election result will be announced on Saturday once votes have been counted in 14 constituencies.

The lower turnout has sent rumours swirling that the election could be tighter than it was thought, with opinion polls having indicated Sadiq Khan would secure re-election relatively comfortably.

Sophy Ridge wants to get the opinion of our Politics Hub panel, and former government special adviser James Starkie says he believes this vote will be a game-changer in a sense. 

"For the last four or five years, London has been considered a Labour city and impossible [for the Conservatives to win]," he says.

"My prediction would be, whatever the result, when we come out of it that will no longer be the case and it will be seen as at least winnable." 

Former Labour minister Caroline Flint says Mr Khan may have been impacted by the switch to first past the post. 

"In the past, the Labour candidate would have benefited from Greens, Liberals and others to the left voting their second preference for Labour," she says.

This might be a terrible set of results for the Conservatives, but it's not an unequivocally good night for Labour either, our elections analyst Professor Michael Thrasher says. 

Labour has lost some seats to independents, and the drop for the Conservatives is not fully reflected in Labour's rise, he says. 

Thrasher says local voters are becoming more "willing to engage with smaller parties" as well as with independents. 

He also points out the "enormity of the task facing Labour". 

"Starmer and his party require a swing larger than any seen in any post-war election just to win a majority of two seats," he says. 

Even Tony Blair did not achieve a swing of 12.7%, he says. 

"Labour still has not crossed the line, even on these results," he adds. 

It's more bad news for the Conservative Party as it loses control of two more councils.

Havant is now under no overall control after the Tories lost 17 seats there.

Labour gained seven seats and the Lib Dems gained five. It also marked the first seat gains of the local elections for Reform UK, which secured two.

The Conservatives have also lost Dudley to no overall control after a loss of 11 seats.

Seven more seats went to Labour, three to the Lib Dems and one to an independent candidate.

Yvette Cooper says Labour's stance on Gaza has "obviously been a factor" which has seen the party's vote share fall in some areas.

The shadow home secretary tells the Politics Hub that many people "rightly" feel strongly about the issue as "tens of thousands of people have been killed, including the majority of them women and children".

Questioned on whether Labour feels it is on the right course or will change its stance, Ms Cooper says: "We have to recognise the strength of feeling on this issue and I think we always take the view in the Labour Party that we need to earn every vote and therefore we have to always listen and reflect. When we lose votes in any area, we always have to listen."

The crisis in Gaza is an issue that spans beyond party political debates, she says.

Labour previously faced heavy criticism over its repeated refusal to call for an immediate ceasefire.

Keir Starmer triggered anger among many people within his own party after comments he made about Israel during an LBC interview in October.

In the widely shared clip, the Labour leader was asked what a "proportionate" response would look like, to which Sir Keir replied that responsibility "lies with Hamas" and that Israel "has the right to defend herself".

Presenter Nick Ferrari interjected: "A siege is appropriate? Cutting off power, cutting off water?"

The Labour leader replied: "I think that Israel does have that right. It is an ongoing situation."

He added: "Obviously everything should be done within international law, but I don't want to step away from the core principles that Israel has a right to defend herself and Hamas bears responsibility for the terrorist acts."

Next up on the show is shadow home secretary Yvette Cooper.

She says the results of the local elections so far indicate the country is "desperate for change".

But she notes that they don't "translate completely" to general elections.

She says the party will continue to work for "every single vote" .

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