The market and competition section of the business plan should begin by describing your companies market. Essentially, this means answering several basic questions, including:
What are the trends in your industry? The market section of your business plan should begin with an assessment of the industry in which you will operate, including a description, an
analysis of trends, and an assessment of the business opportunities. Our economy is typically
divided into six general categories: service; manufacturing; technology; commerce; energy,
and health care. There is further segmentation by industry. Many businesses are formed
around the intersection of several industries making an analysis of trends that would
impact future growth dependent on several variables. The research you do here will support
your financial projections so it should be well documented. If you will be affected significantly
by regulation, you should be asking questions about the risks of increased regulation or the
opportunities that may be created by deregulation. Changes in technology have affected all
businesses and are expected to continue to do so. However these changes vary among
industries. The typical distribution channels in your industry will influence the course of
your marketing and sales plans.
What is the target market? This question is usually answered in terms of a particular category of buyer. That is, the market may be consumers between the ages of 28 and 40, or it may be upscale restaurants, or process manufacturers. Beyond that, each market has characteristics that determine customer location, and purchase and payment preferences. These should be described as they pertain to your product or service. Although you may be tempted to define your market very broadly it is usually best to be as specific as possible.
How large is the market? You need to provide some data as to how many individuals or
businesses make up the market you are trying to reach. Getting the information may require
extrapolating from various sources. For instance, if you are selling a pesticide designed for use
with peach trees, you may need to determine the number of farmers cultivating peaches as
well as the number of peach trees in order to estimate the size of the market for the pesticide.
Moreover, you must decide whether to extend your calculations from the United States to
Mexico and Central America, or limit them to your immediate region, such as the southeastern United States. Your assessment of the size of the market should also take into account market trends, demographics, geography and other key variables. You must assure the readers of your plan that the potential market will be large enough to support your business proposition. On the other hand, if your target market is too large it may be too costly to effectively serve it.
What is the competition? Executives often neglect this question. They tend to feel that their product or service is so superior that competition won’t be significant. Underestimating the competition can be fatal. Competitors that are well established and prospering are doing so for very good reasons, and it is up to you to determine those reasons. Readers of the business plan are likely to be concerned about the competition, so this issue must be addressed directly by listing the companies that will be your primary competitors and assessing their respective strengths and weaknesses. Describe how you intend to compete with them and what you expect their response to your market plans will be. New ideas are often pursued by multiple companies simultaneously vying for first-to-market advantage. Many may also boast strong financial backing. Be sure to elucidate why you believe you will claim the edge. You should also address future competition, particularly if you believe that there are relatively low barriers to entry for potential new competitors. A concise and honest appraisal of your competition will lend a great deal of credibility to your business plan.
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