- Credit cards
- View all credit cards
- Banking guide
- Loans guide
- Insurance guide
- Personal finance
- View all personal finance
- Investing + Retirement
- Small business
- View all small business
You’re our first priority. Every time.
We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners .
How to Write a Market Analysis for a Business Plan
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .
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:
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:
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
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:
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:
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
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
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.
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.
On a similar note...
Create your address on the web.
- Domain Check
- Free Domain
Move your domain name to IONOS.
Secure site traffic and build trust.
Protect your domain from threats.
Create your own website easily.
Our experts build your website.
Create your own online store.
Fast, scalable hosting for any website.
Optimized for speed, reliablity and control.
Deploy your site, app, or PHP project from GitHub.
Reach out with your own email address.
Safeguard your emails against loss.
Secure and share your data on the go.
Powerful Exchange email and Microsoft's trusted productivity suite.
Collaborate smarter with Google's cloud-powered tools.
Protect your data from viruses, ransomware, and loss.
Pay as you go with your own scalable private server.
Your fully virtualized private server.
Get enterprise hardware with unlimited traffic
Individually configurable, highly scalable IaaS cloud
- Business Name Generator
- Logo Creator
- Favicon Generator
- Whois Lookup
- Website Checker
- SSL Checker
- IP Address Check
- Validation service
- Grow Your Business
Market analysis – the definition
A market analysis provides information about industries, customers, competitors, and other market variables. You can also determine the relationship between supply and demand for a specific product or service. Based on these insights, you can make more informed decisions about possible marketing strategies.
Different methods of market analysis
Market analysis vs. market research: what are the main differences, what is a market analysis for, market description: examine your market, market size and market development: how attractive is the market, competitive analysis: what are the market characteristics, analysis of the customer industry, potential analysis of the target market: how will the market develop in the future, what is a market analysis.
How suitable is your offer for a certain market? A market analysis will answer these important questions. Every market participant – whether companies, founders, or private customers – can carry out a market analysis. In any case, it serves as a basis for decision-making. Information is collected and evaluated from suppliers and buyers in order to make purchase or sales decisions. Furthermore, you can evaluate your current market or view new markets.
$1 Domain Names
Register great TLDs for less than $1 for the first year.
Why wait? Grab your favorite domain name today!
Market analysis is a large part of market research and an important component of a business plan . In this plan, business founders document their business idea in writing. During the course of the market analysis, a specific market is taken into account. With the help of the results displayed, companies can identify the opportunities and risks of that particular market. The target group forms the basis of the market analysis.
In order to carry out a market analysis you will require reliable information. Generally speaking, small companies tend to carry out the necessary research for their market analysis themselves. Larger companies, on the other hand, often commission market research institutes to do it for them. A market analysis can be carried out using various methods of data collection. A distinction is made between primary and secondary research .
With primary research , experts from a target market are interviewed in order to collect new data. The advantage of this is that it is still your own research purpose in focus. This way, you can collect the data you need for your market analysis. In contrast to this, secondary research uses existing data records from previous surveys. This can be collected both internally and externally. By opting for secondary research you can save both time and money because you don’t have to conduct costly interviews and evaluation. Sources for representative data are, for example, the Federal Statistical System, professional chambers, annual reports of other companies, or trade journals.
The bigger the company, the broader your market analysis should be.
Market research means the systematic investigation of a specific market, as such research provides information on the basis of which you can select a suitable marketing instrument. In contrast to market research, market analysis focuses on a specific market on a given date . The aim of market analysis is to identify the most important characteristics of a market and to determine the market structure at a certain point in time.
The market structure describes the structure of a certain market. It focuses on the interaction between suppliers and consumers and can be determined on the basis of various criteria. These criteria depend on different characteristics of a market. These include the size and value as well as the number of suppliers, the buying behavior of consumers, or growth forecasts.
If you want your business plan to be successful, you will need to carry out a market analysis. A comprehensive market analysis forms the basis of the development of a marketing strategy and concrete marketing measures.
Further reasons for conducting a market analysis:
- With a market analysis, you can back up your business idea with figures, data, and facts, and therefore provide a convincing business plan.
- You can recognize market potential at an early stage and avoid making the wrong decisions.
- You can identify any existing knowledge gaps and fill them in on time.
- A market analysis shows you which competing products are already on the market.
- With a market analysis, you can identify the market entry barrier and estimate the market attractiveness.
Market analysis: content and structure
An effective market analysis will include an accurate description of the target market and thorough market research. It conveys a holistic picture of a specific market. A market analysis consists of five different areas in which information is collected and analyzed.
At the beginning, define your market and differentiate it from other markets. Depending on the product or service, your market can be defined using various criteria. In order to carry out segment-specific analyses , the target market must be divided into different segments based on certain characteristics. Such characteristics can be socio-demographic (age, sex, income) or regional (states, cities).
The following questions should be covered in the market description:
- What target group is your product or service aimed at?
- What age group is your product aimed at?
- What is the average income of your target market?
- Where does your target market live?
Find out as much specific information as possible about your target market:
- Does your target market drink chocolate mocca or black coffee?
- How fast does your target group drink coffee? 20 or 30 minutes?
When determining the size of your market you should use data that is as accurate and up-to-date as possible. This part of the market analysis is about determining and evaluating the actual turnover or sales volume of a product or service in a specific market. Based on these figures you can make forecasts about the market development and derive the attractiveness of the market from this. The market development includes market growth and growth rates.
What are suitable sources for procuring information?
The following administrative bodies and internet sites provide free input for your market analysis:
- The U.S. Census Bureau provides reliable information that covers all topics from A for advance monthly retail sales, to Z for zip-codes. With resources such as surveys, programs, and news articles, there is no shortage of information.
- The Small Business Administration provides free acess to business and economic statistics collected by the U.S. government.
- Statistics, market data, and studies can be found online at Statista . There you can view data from market research and opinion research institutions, information from the business world, and official statistics.
- GlobalData supposedly produces over 15,000 reports, briefings, forecasts, and data books a year. It features a wide range of sectors, companies, and countries.
The competitive analysis considers individual factors that are important for a market. Here, the essential characteristics of a market are analyzed and described. The “ Five Forces Framework” is an established tool for analyzing competition, especially in the consulting industry. The management theorist, Michael E. Porter, shows which factors are important for the analysis of both the market and the competition:
- Bargaining power of customers : How do customers react to price increases or decreases? How important is your product or service for your target group?
- Bargaining power of suppliers : Suppliers have a particularly high bargaining power if the number of suppliers is limited. How can you react to price increases if necessary?
- Threat of substitute products and markets: Are there alternatives to your product or service? Could emerging innovation jeopardize the distribution of your product or service?
- New competitors and market entry barriers: If a market is particularly attractive, it is sure to attract new competitors. How high are the market entry barriers for potential competition? For example, high investment costs for a product or service can be a barrier to market entry. Access to a market is also made more difficult if high marketing costs are necessary to achieve a certain level of awareness, or if resources are difficult to access due to exclusive suppliers, or if a shop is in an awkward location.
- Competitors in the market: How high is the competition? Who dominates the market? Which competitors are ahead and why?
In the competitive analysis you should get to know not only your customers, but also your competitors and possible competitive advantages :
- How quickly should you enter the market?
- What are the dangers of entering the market?
- Who offers a similar range of products and how many competitors are there?
- What do your competitors do well and what can you do better?
- How similar is your target market to that of your competitor?
The analysis of the customer industry identifies the industries that achieve the highest sales or turnover. In doing so, you should again refer to your defined market. You can then analyze the structure and attractiveness of the industries with regard to the various sales aspects. As a result of your analysis you can identify the target groups and their various industries and you can determine customer requirements and customer behavior . Based on the results, you can, for example, develop suitable marketing strategies for your business.
The following questions should be answered:
- How high are the revenues generated in the particular industry?
- Which company is the market leader?
- What are the current trends in the industry?
- Which innovations have been able to advance the industry?
A market analysis does not only reveal the past and current state of a market, but also the trend of its future development. For this purpose, the potential analysis highlights potential employees, market entry barriers, success factors, as well as current developments and trends. A forecast of the market development is particularly important for your sales planning and for possible investors.
With the help of a market analysis, businesses can gain valuable information about a certain market. If you are setting up a business, want to investigate your current market, or simply look at new markets, a market analysis helps you to identeify and assess the opportunities and risks of a market. On the basis of a market analysis, you can develop concrete marketing strategies and successfully implement your business idea.
Be prepared for holiday shopping season and turn off-line visits into online sales. Learn more about Small Business Saturday and special marketing & promotion ideas for business owners in our Startup Guide article.
Click here for important legal disclaimers.
Why do we need market research?
Market research is an important procedure to advance a company or to make decisions as an entrepreneur. Customers and respondents play an important role, as their opinions are an important indicator of sales opportunities. It is crucial for the success of a company to examine the market at regular intervals. So, what does market research mean, and why is it so important for a company?
Corporate identity: the five most important aspects and how you apply them
What is corporate identity and how does it help your company? The concept of corporate identity aims to standardize the values and behavior in all areas of a company. In doing this, you improve communication within the company, as well as externally, and use your corporate identity as a driving force to establishes and strengthens your position in the market. This guide will explain which aspects…
Saving taxes – a guide for the self-employed
How can I save on tax? This is an eternal question for the self-employed. In order to be well-versed in questions of tax, and improve your own financial situation, you need the necessary information: What taxes have you incurred? And what can be deducted from them?
Lean startup: reasons without risk?
Dropbox, Airbnb, Twitter – all these succesful companies have one thing in common: they became successful using the lean startup model. This method questions traditional business concepts and procedures, and instead promises greater flexibility and innovation. But what do lean startups mean for product development and company culture, and how can you benefit from these new ideas?
- Search Search Please fill out this field.
- Building Your Business
- Becoming an Owner
- Business Plans
How to Write the Market Analysis Section of a Business Plan
Alyssa Gregory is an entrepreneur, writer, and marketer with 20 years of experience in the business world. She is the founder of the Small Business Bonfire, a community for entrepreneurs, and has authored more than 2,500 articles for The Balance and other popular small business websites.
The market analysis section of your business plan comes after the products or services section and should provide a detailed overview of the industry you intend to sell your product or service in, including statistics to support your claims.
In general, the market analysis section should include information about the industry, your target market, your competition, and how you intend to make a place for your own product and service. Extensive data for this section should be added to the end of the business plan as appendices, with only the most important statistics included in the market analysis section itself.
What Should a Market Analysis Include?
The market analysis section of your small business plan should include the following:
- Industry Description and Outlook : Describe your industry both qualitatively and quantitatively by laying out the factors that make your industry an attractive place to start and grow a business. Be sure to include detailed statistics that define the industry including size, growth rate , trends, and outlook.
- Target Market : Who is your ideal client/customer? This data should include demographics on the group you are targeting including age, gender, income level, and lifestyle preferences. This section should also include data on the size of the target market, the purchase potential and motivations of the audience, and how you intend to reach the market.
- Market Test Results : This is where you include the results of the market research you conducted as part of your initial investigation into the market. Details about your testing process and supporting statistics should be included in the appendix.
- Lead Time : Lead time is the amount of time it takes for an order to be fulfilled once a customer makes a purchase. This is where you provide information on the research you've completed on how long it will take to handle individual orders and large volume purchases, if applicable.
- Competitive Analysis : Who is your competition? What are the strengths and weaknesses of the competition? What are the potential roadblocks preventing you from entering the market?
7 Tips for Writing a Market Analysis
Here is a collection of tips to help you write an effective and well-rounded market analysis for your small business plan.
- Use the Internet : Since much of the market analysis section relies on raw data, the Internet is a great place to start. Demographic data can be gathered from the U.S. Census Bureau. A series of searches can uncover information on your competition, and you can conduct a portion of your market research online.
- Be the Customer : One of the most effective ways to gauge opportunity among your target market is to look at your products and services through the eyes of a purchaser. What is the problem that needs to be solved? How does the competition solve that problem? How will you solve the problem better or differently?
- Cut to the Chase : It can be helpful to your business plan audience if you include a summary of the market analysis section before diving into the details. This gives the reader an idea about what's to come and helps them zero in on the most important details quickly.
- Conduct Thorough Market Research : Put in the necessary time during the initial exploration phase to research the market and gather as much information as you can. Send out surveys, conduct focus groups, and ask for feedback when you have an opportunity. Then use the data gathered as supporting materials for your market analysis.
- Use Visual Aids : Information that is highly number-driven, such as statistics and metrics included in the market analysis, is typically easier to grasp when it's presented visually. Use charts and graphs to illustrate the most important numbers.
- Be Concise : In most cases, those reading your business plan already have some understanding of the market. Include the most important data and results in the market analysis section and move the support documentation and statistics to the appendix.
- Relate Back to Your Business : All of the statistics and data you incorporate in your market analysis should be related back to your company and your products and services. When you outline the target market's needs, put the focus on how you are uniquely positioned to fulfill those needs.
By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.
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.
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.
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.
Published on 01 Sep 2013 , last update on 09 Jun 2023 , as per our editorial standards .
Create a convincing business plan
Assess the profitability of your business idea and create a persuasive business plan to pitch to investors
500,000+ entrepreneurs have already tried our solution - why not join them?
Not ready to try our on-line tool ? Learn more about our solution here
Need some inspiration for your business plan?
Subscribe to The Business Plan Shop and gain access to our business plan template library.
Need a professional business plan? Discover our solution
Write your business plan with ease!
It's easy to create a professional business plan with The Business Plan Shop
Want to find out more before you try? Learn more about our solution here
- Search Search Please fill out this field.
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.
- 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 ."
- Business Development: Definition, Strategies, Steps & Skills 1 of 46
- Business Ethics: Definition, Principles, Why They're Important 2 of 46
- Business Plan: What It Is, What's Included, and How to Write One 3 of 46
- Organizational Structure for Companies With Examples and Benefits 4 of 46
- Which Type of Organization Is Best For Your Business? 5 of 46
- What Are the Major Types of Businesses in the Private Sector? 6 of 46
- Corporate Culture Definition, Characteristics, and Importance 7 of 46
- What Is an S Corp? Definition, Taxes, and How to File 8 of 46
- LLC vs. Incorporation: Which Should I Choose? 9 of 46
- Private Company: What It Is, Types, and Pros and Cons 10 of 46
- Sole Proprietorship: What It Is, Pros & Cons, and Differences From an LLC 11 of 46
- Bootstrapping Definition, Strategies, and Pros/Cons 12 of 46
- Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 46
- Seed Capital: What It Is, How It Works, Example 14 of 46
- Venture Capital: What Is VC and How Does It Work? 15 of 46
- Startup Capital Definition, Types, and Risks 16 of 46
- Capital Funding: Definition, How It Works, and 2 Primary Methods 17 of 46
- Series Funding: A, B, and C 18 of 46
- Small Business Administration (SBA): Definition and What It Does 19 of 46
- Upper Management: What it is, How it Works 20 of 46
- What is the C Suite?: Meaning and Positions Defined 21 of 46
- Chief Executive Officer (CEO): What They Do vs. Other Chief Roles 22 of 46
- Operations Management: Understanding and Using It 23 of 46
- Human Resource Planning (HRP) Meaning, Process, and Examples 24 of 46
- Brand: Types of Brands and How to Create a Successful Brand Identity 25 of 46
- What Is Brand Personality? How It Works and Examples 26 of 46
- What Is Brand Management? Requirements, How It Works, and Example 27 of 46
- What Is Brand Awareness? Definition, How It Works, and Strategies 28 of 46
- Brand Loyalty: What It Is, and How to Build It 29 of 46
- Brand Extension: Definition, How It Works, Example, and Criticism 30 of 46
- What Is Social Networking? 31 of 46
- Affiliate Marketer: Definition, Examples, and How to Get Started 32 of 46
- What Is Commercialization, Plus the Product Roll-Out Process 33 of 46
- Digital Marketing Overview: Types, Challenges & Required Skills 34 of 46
- Direct Marketing: What It Is and How It Works 35 of 46
- Marketing in Business: Strategies and Types Explained 36 of 46
- What Are Marketing Campaigns? Definition, Types, and Examples 37 of 46
- How to Do Market Research, Types, and Example 38 of 46
- Micromarketing Explained: Definition, Uses, and Examples 39 of 46
- Network Marketing Meaning and How It Works 40 of 46
- Product Differentiation: What It Is, How Businesses Do It, and the 3 Main Types 41 of 46
- Target Market: Definition, Purpose, Examples, Market Segments 42 of 46
- Outside Sales: What They are, How They Work 43 of 46
- What Is a Sales Lead? How It Works and Factors Affecting Quality 44 of 46
- Indirect Sales: What it is, How it Works 45 of 46
- What Is Inside Sales? Definition, How It Works, and Advantages 46 of 46
- Terms of Service
- Editorial Policy
- Your Privacy Choices
By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.
How to Conduct a Market Analysis for Your Business
Table of contents.
A market analysis is a thorough assessment of a market within a specific industry. These analyses have many benefits, such as reducing risk for your business and better informing your business decisions. A market analysis can be a time-intensive process, but it is straightforward and easy to do on your own in seven steps.
To perform a market analysis for your business, follow the steps outlined in this guide.
What does a market analysis include?
In a market analysis, you will study the dynamics of your market, such as volume and value, potential customer segments , buying patterns, competition, and other important factors. A thorough marketing analysis should answer the following questions:
- Who are my potential customers?
- What are my customers’ buying habits?
- How large is my target market ?
- How much are customers willing to pay for my product?
- Who are my main competitors?
- What are my competitors’ strengths and weaknesses ?
What are the benefits of running a marketing analysis?
A marketing analysis can reduce risk, identify emerging trends, and help project revenue. You can use a marketing analysis at several stages of your business, and it can even be beneficial to conduct one every year to keep up to date with any major changes in the market.
A detailed market analysis will usually be part of your business plan , since it gives you a greater understanding of your audience and competition. This will help you build a more targeted marketing strategy.
These are some other major benefits of conducting a market analysis:
- Risk reduction: Knowing your market can reduce risks in your business, since you’ll have an understanding of major market trends, the main players in your industry, and what it takes to be successful, all of which will inform your business decisions. To help you further protect your business, you can also conduct a SWOT analysis , which identifies the strengths, weaknesses, opportunities and threats for your business.
- Targeted products or services: You are in a much better position to serve your customers when you have a firm grasp on what they are looking for from you. When you know who your customers are, you can use that information to tailor your business’s offerings to your customers’ needs.
- Emerging trends: Staying ahead in business is often about being the first to spot a new opportunity or trend, and using a marketing analysis to stay on top of industry trends is a great way to position yourself to take advantage of this information.
- Revenue projections: A market forecast is a key component of most marketing analyses, as it projects the future numbers, characteristics and trends in your target market. This gives you an idea of the profits you can expect, allowing you to adjust your business plan and budget accordingly.
- Evaluation benchmarks: It can be difficult to gauge your business’s success outside of pure numbers. A market analysis provides benchmarks or key performance indicators (KPIs) against which you can judge your company and how well you are doing compared to others in your industry.
- Context for past mistakes: Marketing analytics can explain your business’s past mistakes or industry anomalies. For example, in-depth analytics can explain what impacted the sale of a specific product, or why a certain metric performed the way it did. This can help you avoid making those mistakes again or experiencing similar anomalies, because you’ll be able to analyze and describe what went wrong and why.
- Marketing optimization: This is where an annual marketing analysis comes in handy – regular analysis can inform your ongoing marketing efforts and show you which aspects of your marketing need work, and which are performing well in comparison to the other companies in your industry.
A market analysis can benefit your business in many ways, especially if you conduct regular analyses to make sure you have current information for your marketing efforts.
What are the drawbacks of running a marketing analysis?
The below drawbacks of running a market analysis pertain less to the method itself than the resources it requires.
- Market analysis can be expensive. If you’re not as familiar with marketing concepts such as market volume and customer segmentation, you might want to outsource your market analysis. Doing so can be great for your analysis’s quality, but it can also leave a big dent in your budget. Narrow your market analysis to a certain group – perhaps current customers – to lower your costs.
- Market analysis can be time-consuming. Market analysis can take precious time away from more directly business-related tasks. You can analyze one area at a time – say, buying patterns or competition – to free up your day-to-day schedule.
- Market analysis can require extra staff. Some larger companies retain in-house market analysis staff, and you can follow their lead. Doing so, though, comes with all the usual costs of hiring a new employee . The question then becomes: Do you conduct your market analysis yourself, outsource it, or hire in-house? The more expensive options can often yield more meaningful insights.
- Market analysis can be narrow. The most successful market analyses use actual customer feedback, which analysts often get through customer surveys. These surveys may reach only a portion of your entire customer base, leading to an inaccurate sample size. The result is that market analysis may not fully detail your customers and what you should know about them.
Market analysis vs. conjoint analysis vs. sentiment analysis
Where market analysis is broad and comprehensive, conjoint analysis focuses on how customers value what you offer. Surveys are often the backbone of conjoint analysis – they’re a great way for customers to share what drives their purchases. Product testing is an especially common application of conjoint analysis. This method can yield insights into pricing and product features and configurations.
Sentiment analysis goes beyond number-driven market and conjoint analysis to identify how customers qualitatively feel about your offerings. It can show you what customers are happy and unhappy about with your offerings or buying process. You can also wade into deeper emotional territory such as anger, urgency and intention, or you can dig up descriptive feedback. It’s a great tool to use alongside market analysis, whereas conjoint analysis is all but included in market analysis.
How to conduct a market analysis
While conducting a marketing analysis is not a complicated process, it does take a lot of dedicated research, so be prepared to devote significant time to the process.
These are the seven steps of conducting a market analysis:
1. Determine your purpose.
There are many reasons you may be conducting a market analysis, such as to gauge your competition or to understand a new market. Whatever your reason, it’s important to define it right away to keep you on track throughout the process. Start by deciding whether your purpose is internal – like improving your cash flow or business operations – or external, like seeking a business loan. Your purpose will dictate the type and amount of research you will do.
Use our guide to choosing a business loan to make the right decision after conducting a market analysis. Visit our business loan reviews page to find options and learn all about easy-approval options.
2. Research the state of the industry.
Map a detailed outline of the current state of your industry. Include where the industry seems to be heading, using metrics such as size, trends and projected growth, with plenty of data to support your findings. You can also conduct a comparative market analysis to help you find your competitive advantage within your specific market.
3. Identify your target customer.
Not everyone in the world will be your customer , and it would be a waste of your time to try to get everyone interested in your product. Instead, use a target market analysis to decide who is most likely to want your product and focus your efforts there. You want to understand your market size, who your customers are, where they come from, and what might influence their buying decisions. To do so, look at demographic factors like these:
During your research, you might consider creating a customer profile or persona that reflects your ideal customer to serve as a model for your marketing efforts.
4. Understand your competition.
To be successful, you need a good understanding of your competitors, including their market saturation, what they do differently than you, and their strengths, weaknesses and advantages in the market. Start by listing all your main competitors, then go through that list and conduct a SWOT analysis of each competitor. What does that business have that you don’t? What would lead a customer to choose that business over yours? Put yourself in the customer’s shoes.
Then, rank your list of competitors from most to least threatening, and decide on a timeline to conduct regular SWOT analyses on your most threatening competitors.
5. Gather additional data.
When conducting marketing analyses, information is your friend – you can never have too much data. It is important that the data you use is credible and factual, so be cautious of where you get your numbers. These are some reputable business data resources:
- U.S. Bureau of Labor Statistics
- U.S. Census Bureau
- State and local commerce sites
- Trade journals
- Your own SWOT analyses
- Market surveys or questionnaires
6. Analyze your data.
After you collect all the information you can and verify that it is accurate, you need to analyze the data to make it useful to you. Organize your research into sections that make sense to you, but try to include ones for your purpose, target market and competition.
These are the main elements your research should include:
- An overview of your industry’s size and growth rate
- Your business’s projected market share percentage
- An industry outlook
- Customer buying trends
- Your forecasted growth
- How much customers are willing to pay for your product or service
7. Put your analysis to work.
Once you’ve created a market analysis, it’s time to actually make it work for you. Internally, look for where you can use your research and findings to improve your business. Have you seen other businesses doing things that you’d like to implement in your own organization? Are there ways to make your marketing strategies more effective?
If you conducted your analysis for external purposes, organize your research and data into an easily readable and digestible document to make it easier to share with lenders.
Retain all of your information and research for your next analysis, and consider making a calendar reminder each year so that you stay on top of your market.
Making market analysis easy
If you have the time to conduct a market analysis yourself, go for it – this guide will help. If you don’t have the time, hiring an in-house expert or outsourcing your analysis is often worth the cost. Your analysis will help you figure out who to target and how – and that’s a huge part of business success.
Building Better Businesses
Insights on business strategy and culture, right to your inbox. Part of the business.com network.
- Project planning |
- How to create a competitive analysis (w ...
How to create a competitive analysis (with examples)
Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.
Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up.
What is a competitive analysis?
Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own.
Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape.
What to include in a competitive analysis
The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:
A description of your company’s target market
Details about your product or service versus the competitors’
Current and projected market share, sales, and revenues
Marketing and social media strategy analysis
Differences in customer ratings
You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.
How to do a competitive analysis
Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.
1. Create a competitor overview
In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.
Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.
2. Conduct market research
Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .
Primary market research may include:
Purchasing competitors’ products or services
Conducting online surveys of customers
Holding in-person focus groups
Secondary market research may include:
Examining competitors’ websites
Assessing the current economic situation
Identifying technological developments
Reading company records
Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website.
3. Compare product features
The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:
Age of audience served
Number of features
Style and design
Ease of use
Type and number of warranties
Customer support offered
Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.
4. Compare product marketing
The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan .
Areas you’ll want to analyze include:
As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:
What story are they trying to tell?
What value do they bring to their customers?
What’s their company mission?
What’s their brand voice?
Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics.
5. Use a SWOT analysis
Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.
During a SWOT analysis, ask yourself:
What do we do well?
What could we improve?
Are there market gaps in our services?
What new market trends are on the horizon?
Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.
6. Identify your place in the market landscape
The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market.
For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors.
This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape.
Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short.
Competitive analysis example
Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:
Step 1: Use Google to compile a list of your competitors.
Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company.
Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses.
Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence.
After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out.
You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.
Drawbacks of competitive analysis
There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner.
Don’t forget to take action
You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .
Be wary of confirmation bias
Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.
Update your analysis regularly
A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times.
Boost your marketing strategy with competitive analysis
Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.
Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.
How to create a winning marketing plan (with examples)
Project management software and tools: Your best picks for 2023
SWOT analysis: What it is and how to use it (with examples)
SMART Goals: How To Write Them and Why They Matter
- Search Engine Optimization (SEO)
- Website Design and Development
- Marketing Consultations
- Content Creation
- Email Marketing
- Social Media
- PPC Services
- Website Portfolio
- SEO Case Studies
Understanding the Difference Between a Marketing Plan And a Business Plan
If you have started a business (or intend to do so in the future), you have likely determined it will be important to have a business plan moving forward. It is equally important to have a sound marketing plan. Creating plans that work with one another is crucial to your success. Doing so will enable your company to stay organized and will help you take measurable steps to achieve whatever level of accomplishment you are aiming for. So, what makes the difference between a marketing plan and a business plan, and how do they both benefit you?
Startup companies will use business plans to get off the ground and persuade outside investors to work with them. The elements of a solid business plan are straightforward and easy to learn, but very important to maintain. A business plan’s length can vary depending on the type of business you run. All key information you include in a business plan should fit into a document that is anywhere from 15 to 20 pages long. All business plans have these same following elements:
In this section the company is outlined and the mission statement is introduced. This section also includes information regarding leadership, workers, daily operations, and the company’s location.
Products and Services
The products and services your company will offer can be outlined in this section. Pricing, product lifespan, and consumer benefits can also be included. If other important factors need to be mentioned, such as the processes of production and manufacturing, any patents your company have claimed, and proprietary technology, then those factors should be recorded in this section.
Along with understanding your target market, your company should understand the industry you reside in. By undergoing a thorough market analysis, you can outline exactly who your competitors are in your industry and how much influence they currently have. The strengths and weaknesses of a competitor will be highlighted in this section. A consumer’s demand for products and services is always changing, and the expected demand for what a company is selling will be plainly described in this section. Will it be easy or hard for your company to grab the market share from the existing competitors? That is the main question this section will answer.
Having a marketing strategy section will seamlessly dovetail into your marketing plan document. It will spell out what needs to be done when you begin a marketing campaign. Attracting and maintaining a customer base is at the heart of this section, and how your company intends to reach out to the consumer must be fleshed out. Clear distribution channels should be shared in this section, to give your team an idea of how your marketing campaign is getting funneled out to customers and investors.
Having the support of investors is critical for many businesses, and the strength of your business plan will reside in the financial planning section. This is where you utilize accountants and the most economically savvy members of your team to provide numbers and statistics. Businesses that are already established will need to provide financial information such as the income statement, balance sheet, statement of cash flows, statement of comprehensive income, and statement of stockholders’ equity. If you are a new business, prepare documents that will discuss targets and estimates for the first few years of operation and any potential investors you desire to work with.
What kind of budget does your company have? A business plan isn’t complete without an established budget. Costs that relate to staffing, development, manufacturing, marketing, or anything miscellaneous will make up your budget. Whether your budget is loose or tight, this figure will be a helpful stepping stone in guiding your company to its desired goals.
Within the framework of the business plan, you will find a section dedicated to the marketing plan. A marketing plan can also be split out into its own document or plan, rather than just being one section of the business plan. We highly recommend doing this (for reasons we will dive into later). Marketing plans focus solely on determining how to get your service(s) and/or product(s) into the hands of the consumers that will benefit the most from them. Within this portion of your business plan is where you will work on determining who those consumers are as well as deciding on your marketing goals and strategies, researching your competition in the market and determining what types of marketing channels you will use to educate your audience about the thing(s) you are offering. In other words, how will your company stand out from your competitors and grab your audiences attention?
How it Compares to a Business Plan
Compared to a business plan, a marketing plan is a more comprehensive document that heavily outlines the marketing and advertising efforts of a company. Marketing plans are best used as internal documents, and not to be shared with the general public. The marketing plan document should change as your business experiences growth, and as new marketing trends emerge. You will have an easier time finding customers and clients if you know who they are and where they are located.
Marketing is about having the knowledge of what your product or service is and how it can help a target market. Whatever your marketing messages are, they need to speak clearly and effectively to your target market. A marketing plan has the following elements:
Marketing Objectives of the Business
Your company should be specific about its goals. This can include increasing the email list by a certain number of subscribers over the course of a year, or acquiring a specific number of new clients. One way to measure the effectiveness of your marketing plan is to have a quantifiable goal. The objectives you make for your company should be relate to “ SMART ,” which is short for Specific, Measurable, Attainable, Relevant, and Time-bound.
Are you enjoying this post? If so, be sure to subscribe for occasional email updates from our team!
Current Business Marketing Positioning
When it comes to the marketing positioning of your business, there should be an analysis of the current state of your company prepared. What is currently working with your marketing strategy? What do you find challenging about generating new customers and clients? What are the potential issues you might encounter throughout the year, such as moving your company’s headquarters or new laws that could negatively effect how you do business? Doing a SWOT analysis will help with this step of the marketing plan.
This is a section dedicated to research on current market trends, customer needs and demands, sales volumes of the industry, and the expected direction the industry will take.
Business Target Market Outline
This section is where you define the target market demographics of your business. Whatever your target market is, let that guide you in determining what marketing strategies you will implement. Where does your market socialize? How can you convince that market to check out your business? Does the majority of your target market use a specific social media platform? For example, if most of your market uses Facebook, then consider launching a Facebook fan page or group for your business. This part of the marketing plan will be easier to execute if members of your team have experience in social media marketing.
Learning how to create a marketing persona will help significantly with this aspect of creating your marketing plan. Here’s a related blog post we’d suggest reading: How Do You Create a Perfect Buyer Persona?
Any actions that relate to marketing goals, that were scheduled for a specific period of time, should be listed in this section. Have there been any sudden changes to the industry since identifying a desired goal? Will new actions need to be taken as a result of these changes?
Key Performance Indicators (KPI)
This is an integral part of the data that your company will need to explain how you are progressing (and sometimes not progressing) towards your established marketing goals. A key performance indicator is basically a measuring stick that can illustrate the efficiency of a company when it achieves their objectives. KPIs are often used by companies in their marketing campaigns to determine whether or not they are effectively investing their budget.
Customers are not always influenced by only one factor when they purchase products. It takes a combination of factors to entice them to buy. Product, price, promotion, and place make up the 4 P’s of marketing. In this section, outline what your product is and what it does. Provide detail on how much the product will cost, along with where and how you will promote it.
What does the competition look like? Which organizations will be directly competing against you in the marketing industry? The strategies of your competitors should be identified in this section. You should also attach proposed ways to counter your competitors and gain market share.
Forming a strategy is simple. Executing that strategy can be very challenging. How will the various strategies work with your marketing plan to accomplish the desired goals? Promotional strategies, advertising, and other marketing tools your company can use should be highlighted in this section. There is often confusion regarding the difference between goals, strategies and tactics. Consider reading this blog post to come up with appropriate strategies: The Difference Between Marketing Goals, Strategies and Tactics
Your company’s allocation of financial resources to marketing activities should be outlined in detail. Along with the general budget you have for your business plan, you should also have a specific marketing budget kept in mind. Without identifying your marketing budget, it will be impossible to properly carry out marketing activities. Here’s another blog post to check out: How to Set a Marketing Budget for Your Business
Mechanism for Monitoring and Performance
The marketing tools you put in place need to be fruitful. If they aren’t, then these tools should be revised based on the state of your company, whether it is past, current or the expected future state. A plan should be implemented for monitoring the basic daily functions of your company and how well all members of the team are performing. This plan should also reflect how the industry and the overall business environment are trending. You can’t just monitor your own company and not get a feel for what the industry you work in is currently doing.
Different Purposes for the Same Objectives
Now that you know what goes into a business plan and a marketing plan, it is important to know the specific purposes of both plans and how they serve the same objectives your company is attempting to achieve. These plans cover different periods of time and they don’t have identical reasons for being created. Oftentimes business owners see the need to create both plans to secure their financing. Banks and investors will ask for both plans before they agree to invest in your company or send any loan money.
The Purpose of a Business Plan
Your decision-making tool is your business plan. The goals that you have for your business and the target market you intend to reach dictate the content and formats used in this plan. For example, if you run a non-profit organization, your business plan could discuss how your organization’s mission works with its stated objectives. You craft this plan to ask for loans to start a new company or expand one that already exists. A business plan basically prepares you for the future and gives you a better idea of where your company currently stands and what types of resources and initiatives you need to meet your goals.
The Purpose of a Marketing Plan
Your marketing plan is the blueprint that will give you proper instructions on how to achieve your business objectives. This is a key reference piece that will need to be frequently assessed. Should this plan ever become irrelevant in any way, then it needs to be updated immediately. This plan usually assists the growth of your business by defining the appropriate marketing strategies. It also integrates business functions to consistently operate. These functions include marketing, sales, production, finance, and human resources.
How A Marketing Plan and a Business Plan Work Together
While you are unlikely to create a business plan without including a marketing plan, some business owners do choose to decide on their marketing without diving into an entire business plan. While there are times when this might be the best idea for your business (and only you will be able to determine whether or not that is true for you), having both can be extremely helpful, being that one really compliments the other. Some of the very real benefits you might find of having both plans available to you are:
Your business plan will help you to identify the goals of your company and offer you a path to follow. The marketing plan will then give you tangible steps to take that will help you to achieve those goals. Having a business plan without a marketing plan is like having a ladder without any rungs. You will have all the ideas you need without any clear ways as to how to implement them. Using both plans together will help to increase your revenue as you consistently track your progress and make any changes you deem necessary. If the overall goals of the business change, the marketing plan can also shift to keep sales high.
While your business plan will include your initial projections based on your previous research, your marketing plan will give you the opportunity to more accurately track how well you align with those projections. Changes can then be made to better support or clarify your initial estimates.
Again, your business plan will outline both the short and long-term goals you have for your company. Your marketing plan will lay out the small steps needed on a daily basis that will help you to consistently meet those goals at a reasonable pace (rather than trying to do everything at once or dragging your feet and never getting any traction).
Surpassing Your Competition
Your business plan will help you to understand your competition and give you a chance to really educate yourself on what strategies have and have not been working for them. This will enable you to focus on putting your resources into marketing channels that will yield the best benefits.
Your business plan will propose what strategies you will implement to achieve your business goals, while your marketing plan will help you to laser focus those strategies. Having the business plan accessible will ensure that your marketing strategies stay aligned with your greater vision.
A Functional Master Plan
Utilizing these two plans in conjunction with one another regularly will help you create a master plan that will continually guide the workings of your company. This last piece is so important because it foreshadows a larger truth. You WILL have to maintain both of these plans if you want them to continue to work together for the greater good of your business.
Next Best Steps
So, what exactly does maintaining these two plans entail? As your business grows and changes, so will its needs, making it extremely important that you review these plans on a regular basis.
A business plan should be reviewed once per year, giving you an opportunity to notice any areas where you are not meeting your goals or where you may be out of alignment with your bigger vision. Are you operating to the standards and guidelines that you initially intended? If not, do you need to make changes in the business plan or in the way your business is operating?
The marketing plan, on the other hand, should be reviewed each quarter. This is largely because the economy is constantly shifting and changing and, therefore, you may need to quickly adapt your marketing techniques to whatever new situation arises. Additionally, checking this plan regularly allows you to track which marketing modalities are working the best and worst for your business at any given time. Through continual monitoring, you can begin to identify patterns and adapt or plan your future marketing around those patterns.
As you review these plans, you can make whatever changes need to be made to one or both, keeping them constantly working for you.
A Perfect Match
Overall, businesses that understand the differences between a marketing plan and a business plan, and how they can work seamlessly together are likely to have greater success as they move toward achieving their goals. If you don’t know how to create a business or marketing plan, there are several reliable resources and templates available online! And if you need assistance with the planning or execution of your marketing plan, let us know. You can connect with us via the contact form below!
Joshua Lyons Marketing, LLC was established in 2015. Since that time we have provided digital marketing services to business and professionals. We help our clients increase their online exposure as a means to increase sales and revenue. Our core services include search engine optimization (SEO), website development and content creation. We also provide other online marketing services, such as email marketing, marketing consultations and various types of advertising. Our team is based in the Milton, Pace and Pensacola, Florida area. However, we work with clients throughout the United States. Read More
Get a quote today! Just fill out the form below and someone will be in touch!
© 2023 developed by Joshua Lyons Marketing, LLC
- Mobile Forms
- See 100+ integrations
- FEATURED INTEGRATIONS
- See more Integrations
- See more CRM Integrations
- See more Storage Integrations
- See more Payment Integrations
- See more Email Integrations
- Jotform Teams
- Enterprise Mobile
- Prefill Forms
- HIPAA Forms
- Secure Forms
- Assign Forms
- Online Payments
- See more features
- Multiple Users
- Admin Console
- White Labeling
- See more Enterprise Features
- Contact Sales
- Contact Support
- Help Center
- Jotform for Beginners
Get a dedicated support team with Jotform Enterprise.
Apply to Jotform Enterprise for a dedicated support team.
- Sign Up for Free
- Marketing Plan
Marketing plan vs business plan: What’s the difference?
For business owners, nonprofit directors, and community group leaders, the process of writing a business plan or creating a marketing plan can seem intimidating. They may know the ins and outs of what they do every day and have fantastic ideas on how to grow and market their organizations, but the act of putting it on paper often feels like stepping into a world with opaque rules and confusing jargon.
Fortunately, the reality of both business and marketing plans is that they aren’t nearly as complicated as many people think. In fact, most business owners have written both without realizing it, even if only in an informal manner.
Creating a formal business or marketing plan uses a lot of the same steps business owners already take when sketching out new marketing ideas on a napkin or doing some quick back-of-the-envelope math to figure out how to expand into a new city.
But before moving forward with the process, it’s important to know which one you need. In other words, what’s the difference between a marketing plan and a business plan?
Create a marketing plan that works for your business with Jotform’s easy-to-use marketing form templates .
The biggest difference between a business plan and a marketing plan is the scope of what they cover. While both documents can be quite lengthy and thorough, they don’t address the exact same information.
A business plan is typically a much broader document that covers every aspect of your business: operations, supply chains, human resources, materials costs, and — yes — marketing. In fact, a marketing plan will usually be a section of a business plan.
Marketing plans tend to focus much more narrowly on the specifics of making customers aware of and likely to buy a product or service. A marketing plan may touch on some of the same things a business plan does, like the cost of goods sold, but only as they relate to being able to sell those goods to consumers.
Another key difference between the two is how far into the future they look. Business plans, for example, tend to cover a much longer period than marketing plans. A typical window for a business plan, for example, is about five years. A typical window for a marketing plan, on the other hand, will be a year to three years.
The two are updated differently as well. Business plans rarely need to be replaced or updated unless there’s a significant change in the business — a completely new product category, a new business model, or some global event that changes the way a company performs its core function.
Marketing plans are often updated every year. They tend to be part of the yearly budgeting activities that help business owners plan how they will allocate resources to various departments.
This makes sense when you think about it. Companies change their marketing much more often than they change their business model.
The reasons for creating a marketing plan and a business plan are often similar but not identical. Most often, business owners create both to secure financing. Banks and investors frequently ask for business and marketing plans before agreeing to loan money or invest in the company.
But external demands aren’t the only or even the most important reasons to write both kinds of plans. A business plan is a great way to formalize the ideas behind how and why a company works the way it does. It’s a fantastic way for business owners to put down on paper many of the things they’ve been intuitively doing, and cement processes and procedures for running a company.
Business plans are also great at helping you to prepare for future needs. By going through the exercise of writing a full business plan, business owners get an idea of where they are and what kinds of initiatives and resources they need to meet their goals.
Marketing plans are also incredibly useful internally. As we mentioned above, they are an important part of the annual budgeting process. Sitting down and thinking through all of the marketing needs can help both validate a company’s marketing initiatives as well as determine the ideal amount of money to allocate toward marketing.
The bottom line
A marketing plan is a part of a business plan. That’s the easiest way to remember the difference between the two. The business plan shapes everything about the way a company works, and lays out big-picture goals and ideas.
The marketing plan paints a more detailed picture of how the company will use marketing to achieve the goals laid out in the business plan. The marketing plan is department level and has to coexist with plans for other departments — HR, operations, legal and regulatory, and others.
Both plans are important in successfully running a company, but the business plan is more important because it will at least outline some marketing initiatives. For business owners who only have time to create one, the business plan is the logical choice.
Thank you for helping improve the Jotform Blog. 🎉
How to Create a Marketing Plan
How to optimize your Black Friday discount campaigns with Jotform
How to speed up your sales during Black Friday 2023
How to create a marketing budget
Marketing Manager Mindset 2023 Survey Results
How marketing evolves with the stages of your business
Brand ambassador interview questions
9 ways marketing departments use Jotform
How to define your target audience
How to find brand ambassadors
Marketing during the maturity stage of your business
Webinar: Defining your marketing event and promotion strategy
How to track marketing campaigns
How to offer a free consultation
How to write a creative brief
How to build a brand on social media
5 templates to use in your marketing planning
How to create the right marketing goals for your business
How to market during the growth stage of your business
How to create Black Friday sale forms with Jotform
5 marketing strategies to launch your startup
How to create a marketing plan timeline
Implementing cross-channel marketing in your business
Send Comment :
- Starting a Business
- Business Planning
- Content Marketing
- Digital Marketing
- Public Relations
- Business Model
- Financial Forecasting
- Risk Management
- Business Plan
- Online Communities
- Professional Associations
- Social Media
- Human Resource
- Legal Requirements
- Business Structure
- Mission Statement
- Financial Plan
- Market Analysis
- Operational Plan
- SWOT Analysis
- Target Market
- Competitor Analysis
- Customer Profiling
- Market Trends
- Pricing Strategies
- Sole Proprietorship
- Limited Liability
Marketing Plan vs. Business Plan: What’s The Difference?
by Mike Vestil
If you’re starting a new business, you may be wondering about the differences between marketing plans and business plans. While both are crucial to running a successful company, they have important key differences to understand.
Marketing and business plans are two essential tools, but they serve different purposes. A business plan is a more comprehensive, big-picture overview of your company’s mission. In contrast, a marketing plan is a facet of your business plan that will help you advertise and reach your target audience.
Drafting up these plans may seem daunting at first, but once you understand how they operate, you’ll be prepared to take your business to the next level. This article will break down the difference between a marketing plan and a business plan and how both documents in tangent can help you move forward with your company’s development. Let’s dive in!
Image credit: PatriotSoftware.com
One of the most crucial things you can prepare is a business plan when starting or running a company. A business plan is a comprehensive document that outlines the operational and financial goals of a business and its overall strategy for achieving them. A successful business plan includes:
- The company’s mission statement.
- An analysis of its target market.
- A statement of operations.
- A detailed explanation of its services or products.
Creating a business plan is crucial because it will help you stay organized and focused on your long-term goals— essentially, it’s a roadmap of how you will achieve success and meet your business’s clearly outlined missions. The plan will aid you in making informed decisions, assessing risks, and measuring progress.
The length and detail of this plan will vary depending on the size and type of business you are running. However, having a solid business plan is essential for any business, especially start-ups. Start-ups often don’t have the resources that more established businesses do, so owners have to work harder to convince investors to fund or loan money to their projects. A business plan can help smaller or newer companies secure loans and other forms of funding.
In the following sections, I’ll outline the various elements you need to create a successful business plan by walking you through all the steps, from writing a summary to creating a budget.
The executive summary is the first section of your business plan, and it should be approximately one to two pages long, depending on the overall size of your report. It should be well written, concise, and capture the essence of your company, as well as your aims and goals. The executive summary is crucial because it will give potential investors and lenders an in-depth look into your business plans.
This summary will represent the entirety of your plan, so make sure the document includes an overview of the following:
- Your services and products: What will you be selling? Is it a physical good or a service? Will you sell a variety of items or focus on a specific product?
- Your optimal target market: Who is your ideal customer base? What about their demographics or interests makes them the right fit for your product? How will you advertise to them?
- Your competitive advantage: What makes your product stand out from the competition? Is there anything unique or especially compelling about what you have to offer?
- Your financial projections: How much do you expect to profit? What financial aspects do you have to consider? How much of your budget are you allocating to various areas (from production to advertising and everything in between)?
- Your management plan: Will you hire employees, and if so, what is your management strategy? Will you have an on-site location or sell online?
With these questions in mind, you’ll be able to write a compelling summary that covers your mission and the steps you’ll take towards achieving your goals.
With the executive summary out of the way, I’ll now walk you through the other essential sections of your business plan.
Products And Services
This part of your report should include detailed descriptions of your business’s products and services. You should have information on pricing, how long your products last, and an overview of the production process, including information about how your goods will be manufactured and delivered.
If you run a start-up or new business, this part of your plan is especially crucial because it will give potential investors a snapshot of what your business offers. It would be best to showcase what makes your brand unique and how you plan to compete in the market. What are your selling points? Why should customers choose you over your competitors? Highlight any benefits of your company to address how they will meet customer demand.
If you have any patents or trademarks, you can include that information here so that potential investors know that your intellectual property is legally protected.
This section should outline who your competitors are and their influence in your chosen field. This analysis can include information about the strengths and weaknesses of your competitors and how difficult it may be to take market share from these businesses.
Doing detailed industry research will also help you identify areas where you could improve on what similar companies are doing. Once you know what is already offered in the market, you can develop competitive strategies to help your product stand out.
The marketing analysis can also detail your projections and expected demand for your products based on competing industries and companies. Knowing how receptive your target audience will be can help you determine your strategy, which I will go over in the next section.
Once you’ve completed your analysis, it’s time to develop a strategy. This section should include your overall plan for how you will attract and maintain a customer base, as well as what advertising methods you will use to appeal to the right target markets.
It would help to tailor your strategy to your ideal buyers, and it should be realistic and achievable. You should consider your company’s strengths and how you can use them to your advantage in the market. For example, suppose you have a solid online presence. In that case, you may want to focus on digital marketing strategies. Or, if you have a niche product, you can find specific sites to target potential customers.
Additionally, you should provide information on the distribution channels you will use. This data may include where you are sourcing your products and how you plan to deliver them to your customers.
You can also specify how your company intends to communicate with customers by having a plan for after-sales service and how you will handle customer complaints or queries.
Financial planning is essential for any business, although the process will look different depending on whether you’re a startup or run an existing company. Regardless of the current state of your business, you should enlist the help of accountants and economists to create a financial plan.
This section should include detailed information on your company's financial status, as well as projections for the future. All of this information will help to give investors a clear picture of your business' financial stability and growth potential.
If you have an existing business, you'll need to include the following documents:
- Balance sheet: A balance sheet gives an overview of your assets and liabilities. This document includes information on your fixed and current assets, such as property, equipment, and inventory. You should also list your company's liabilities, such as loans and credit lines.
- Cash flow statement: The cash flow statement will show how much money is coming in and out of your business, including information on your sales revenue, expenses, and investments.
- Statement of comprehensive income: The statement of comprehensive income will detail your company's profits and losses over a specific period, allowing for a more holistic view of your company’s income.
- Report on share capital: This report showcases how much money has been invested in your company in stocks.
If you’re a start-up, you’ll need to provide estimates for the first few years of operation, including information on expected sales, profits, and expenses. You should also outline how much money you’ll need to get your business off the ground and how you plan to obtain these funds through potential investors.
Determine your long-term goals for your business and how you plan to achieve them through measurable steps. This data should include expected sales revenue and profit margins. You should also have a plan for reinvesting profits back into the company and address how you will cover any future costs or losses.
Financial planning is an ongoing process, so you should update your business plan annually, especially if your company’s financial status changes. Keeping these documents in order will help you stay on track and ensure that your company meets its projected financial goals.
Your budget is a critical element of your financial plan and should prove to investors that you have a sense of how much money to allocate to various parts of your business. You can break down your budget into different sections, including personnel, development, production, and advertising costs.
Additionally, you can include a sales forecast that outlines your expected revenue and profit margins. These projections will help you to determine how much money you need to cover your costs and make a profit within your allotted budget.
Image credit: MarketingDonut.co
A marketing plan is a document that outlines an organization's advertising goals and strategies. It should cover product promotion, pricing, target markets, and advertising. The focus of marketing plans should be to advertise your product to consumers who are likely to purchase from you.
When creating a marketing strategy, you should consider your target audience, research competition in the market, and develop clear goals and strategies. It would help if you also considered what marketing channels you’ll use, including social media advertising, email marketing, influencer marketing, search engine optimization (SEO), content marketing, or other methods.
How Marketing Plans Compare To Business Plans
A marketing plan focuses solely on the marketing aspect of your business, so it is more detailed about this specific part of your plan. On the other hand, a business plan is an overarching document that outlines the company’s missions regarding product development and financial objectives and a brief overview of marketing goals and competitive challenges.
A marketing plan, while important, is less comprehensive and doesn’t provide as much general information about the company. Therefore, it’s important to remember that a marketing plan and a business plan should work together—the marketing plan provides the overall marketing strategy while the business plan offers a detailed roadmap for succeeding on multiple levels.
You can think of a marketing plan as a more detailed part of the overall business plan. The business plan is more important to present to potential investors because it provides a general overview of a company’s mission, but including a detailed marketing plan is an asset that will aid your business plan.
While business plans typically don’t have to be updated frequently, you should review marketing plans periodically to adjust to the outcomes of advertising efforts and marketing trends. Therefore, it is a more pliable document and is easier to adapt as your business changes and grows.
I’ll outline what elements you need to build a successful marketing plan in the following section.
Your marketing objectives should be specific, measurable, achievable, relevant, and time-bound. Here are some solid examples of marketing objectives:
- Increase conversion rates by 5% in six months by investing in Facebook advertising.
- Build brand awareness by partnering with five new influencers this year.
- Conduct A/B testing over one month with two different advertisements to determine which version yields more web traffic.
Keep in mind that you should align your objectives with the overall goals of your business. Whether you hope to increase profits or reach more customers, your efforts should reflect those aspirations. For example, suppose you desire to establish a better digital presence. In that case, you can advertise on social media. Or, if you want to improve customer communication, you can launch a live chat on your website.
Market research is the process of analyzing current market trends and adjusting your business strategy to meet the projected direction of the industry. You’ll need to know your current business positioning in the field, which involves taking a close look at target markets.
Your target market should be based on the products or services you offer. If you provide a product that appeals to a wide audience, your target market will be much broader than if you offer a product that only appeals to a niche group.
It’s also essential to understand potential buyers’ interests and where you can advertise to them. Does the majority of your target audience use social media? If so, which platforms? What publications do they read? What TV programs do they watch? You can conduct market research in several ways, including surveys, focus groups, interviews, and observational studies.
Once you have this information, you can begin developing buyer personas. A buyer persona is a fictional representation of your target customer. It includes demographic information like age, gender, income level, and job title, as well as your buyer persona’s interests, values, and needs. This information will help you determine where to focus your marketing efforts.
It's essential to understand your competition and stand out in the field if you want to succeed in the market. One of the most important things to do is research similar businesses. To learn about them, you can visit their stores or websites. What are they offering? What prices are they charging? How are they promoting their products? What do their customers say about them in reviews?
Once you find out what they offer, how much they charge, and how they’re promoting themselves, you’ll be able to address any flaws your competitors may have and develop schemes that are unique to your business.
You can also use tools like the SWOT analysis to analyze your competitors’ strengths and weaknesses. This information can help you decide which strategies to use by addressing both internal and external factors.
Now that you understand how to conduct market research and evaluate competing businesses, let’s look at the various strategies you can implement to ensure that your advertising efforts elevate your business.
A marketing mix combines marketing activities that you use to reach your target audience—product, price, place, and promotion.
The product description should include information on what you are selling, how you source it, and the benefits that it will provide to potential buyers. You can include high-quality images or models to showcase these goods.
You’ll also need to include price information, including how much it costs to produce your product and what price you are selling it for, based on your market research on similar items.
The place category will determine where customers can purchase your product. You can outline where your goods will be available, whether on online marketplaces, your website, or in-store.
The promotion section will include information on your advertising campaigns, including email campaigns, social media campaigns, SEO optimization, and more.
Now that you have your objectives and marketing mix in place, it’s time to implement them. Each activity should have a goal associated with it. For example, if one of your goals is to increase website traffic, your next move could be to promote a contest on social media. Or, if you want to raise brand awareness, you can reach out to influencers for a paid partnership.
The more specific information you have about this audience, the better chance of reaching potential customers through advertising campaigns or social media posts that speak directly to their interests and concerns. If done correctly, this could lead to higher conversion rates from potential customers, as well as increased brand awareness among those who may not have been aware of your product before seeing these advertisements.
You should also allocate a budget for each objective and a timeframe for completing your goals. Be realistic about what you can achieve in the given timeframe, and make sure you allow enough time to see the results of your efforts.
Key Performance Indicators (KPI)
Key Performance Indicators (KPI) are metrics that measure how well you’re achieving your objectives. There are many different KPIs you can use, depending on your goals. Common KPIs include website traffic, conversion rate, leads generated, and customer satisfaction. You can also check out my article about how to use KPIs for email marketing for more ideas about KPIs that you can set in your business.
You should track your KPIs regularly and adjust your marketing activities as needed. If you find that you’re not achieving your goals, it’s time to reevaluate your plan and make changes.
Though you will likely already have an overall budget at this point in your business plan, the marketing budget can provide more detail on the distribution of your company’s financial resources towards advertising and promotions.
You should determine what percentage of your funds will go towards advertising efforts— the general advice is between 6-20% of your total budget.
How A Marketing Plan And A Business Plan Work Together
Image credit: MarketingInsiderGroup.com
Companies should have both a business and marketing plan—the business plan outlines the structure and goals of the company. In contrast, the marketing plan explains how you will achieve those goals through marketing activities. If you seek loans or meet with investors, having both of these documents at the ready will benefit your business.
I’ve already established their different purposes, but when used together, there are many benefits to having these documents.
These range from increased sales to more realistic projections. The following section will detail the perks of creating and implementing both plans.
Business plans define the company’s goals, and the marketing plan provides specific steps to achieve these aims. When you have both plans in place, it’s easier to track your progress and make changes as needed, increasing the chances of achieving your objectives and improving sales.
If the overall goals of the business change, the marketing plan may also need to be altered. For example, if the business decides to focus on international sales, the marketing plan will need to reflect this change. Luckily, marketing plans are easier to update, so you can adjust the details as your business expands and evolves.
The more detail you put into these plans, the more likely you are to reliably and consistently track your progress based on your preset goals. While drafting them may be a lot of work initially, staying organized and adjusting your plans as needed will help increase sales in the long-run.
When creating these plans, it’s important to be realistic about what you can achieve by setting achievable goals and estimating the time it will take to complete each activity.
Once you write these plans, you’ll have a better idea of initial projections based on the in-depth market research required to make a budget and set your prices. You’ll also have more information about how to accurately track your marketing efforts using data collection tools and KPIs.
If the business plan and marketing plan are consistent, it will be easier to achieve your objectives. The business plan provides a broad overview of the company, while the marketing plan explains how each marketing activity will help achieve the business’s goals.
Having these plans in place makes it easier to keep your business on track and on-brand. You can adjust your marketing plan as you go to keep up with new objectives or projects, keeping your business organized and streamlined.
Surpassing Your Competition
Creating these plans will help you surpass your competitors—when you clearly understand what you’re up against, it’s easier to create a strategy that will help you stand out.
Business plans help you understand your competition, like what strategies work and what aspects you can improve on. This knowledge will allow you to use your funds and resources on marketing channels to bring optimal value and income.
Once you have implemented these plans, it’s essential to monitor their effectiveness. By keeping track of how well your company matches your projections, you can identify patterns and adapt these plans according to your future goals.
Your business plan can be reviewed annually, which will give you an overview of where you are meeting your goals and what areas you may be falling short in. Does your work meet the standards and guidelines you initially planned?
In comparison, you should review marketing methods quarterly to track which ones are working best and which you can adjust to run your operation more successfully.
FAQ—Marketing Plan vs. Business Plan
Are marketing plans the same as business plans.
A marketing plan is a component of a business plan, but it is not the same thing. A business plan provides a structure and goals for the company, while the marketing plan explains how each marketing activity will help achieve those goals.
What Comes First, Business Plans Or Marketing Plans?
Creating a business plan before making a marketing plan is generally recommended. Keep in mind that the two projects should be consistent with each other and work together to present the most comprehensive, detailed overview of your business goals as possible.
What Is The Difference Between Marketing Plans And Business Plans?
Business plans are longer, more comprehensive documents that cover all aspects of your company’s operations and include the following:
- An explanation of your company’s mission and an executive summary of your goals.
- In-depth details about your products and services, including how they are produced and shipped.
- A marketing analysis that provides detailed industry research and a comparison to similar brands.
- Financial aspects of your business, including a budget.
Alternatively, marketing plans cover only the marketing aspect of your company and address the following areas:
- Marketing objectives.
- Marketing strategies.
- Key performance indicators (KPIs).
- Marketing budget.
While these plans serve different purposes, they can be used together to present an in-depth overview of your company to potential investors and are both valuable assets to track your business goals, successes, and areas to improve on.
Image credit: SimplyBusiness.co.uk
Although a business plan and marketing plan are two different documents, they work together to create a well-rounded view of the company. A good business plan will have realistic goals based on sound market analysis, while a good marketing plan will outline specific objectives to help achieve those projections.
When these two plans are put together, they can increase sales, create realistic projections, and help your business overcome competitive challenges. Therefore, drafting both is essential for having an organized, consistent, and lucrative business.
So, what are you waiting for? Using this guide for reference, start creating your marketing and business plans today!
Learn how to make passive income online
I've put together a free training on how we used the brand new “Silver Lining Method” To Make $10/Day, Then Systematically Grow to $100/Day, Then $1,000/Day & More…
About the author
Mike Vestil is an author, investor, and speaker known for building a business from zero to $1.5 million in 12 months while traveling the world.
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.
- Food & Beverages
- Marketing Examples
How to Do Market Analysis of a Business Plan
What Does a Market Analysis Section in a Business Plan Include?
- Industry description. This can be attained through an extensive research plan . Identifying the current state and possible direction of the industry will let investors know that you’re aware of your actions.
- Target market. You have to be specific with the market you want to focus on. This could be based on a particular age group, location, or personal interests.
- Competition. It’s apparent that one of the greatest obstacles for any simple business plan is the competition. However, competitors have their own share of strengths and weaknesses as well. The company must develop strategies that can give them a competitive advantage.
- Regulations. Government regulations and restrictions can sometimes take a toll in a business plan in pdf . It’s important for a company plan to comply with these rules to prevent potential disputes.
Tips for Writing an Effective Market Analysis
More design, how to prepare swot analysis for business, how to create a business plan, 34+ examples of plans, 10+ risk analysis examples, samples, 18+ examples of simple business plans, 24+ examples of free business plans, situation analysis: its elements and definition of purpose, 9+ business analysis examples,samples, 6+ advertising plan examples, samples, 8+ factor analysis examples, samples, importance of business plan, 42+ business proposal examples, samples.
- id; ?>)" rel="noopener" role="button" tabindex="0" aria-label="postclick">Define Marketing Plan and Its Purpose?
- id; ?>)" rel="noopener" role="button" tabindex="0" aria-label="postclick">16+ Business Plan Examples in PDF
- Online Degree Explore Bachelor’s & Master’s degrees
- MasterTrack™ Earn credit towards a Master’s degree
- University Certificates Advance your career with graduate-level learning
- Top Courses
- Join for Free
What Is a Marketing Plan? And How to Create One
Learn what a marketing plan is, how they help businesses, and the steps for building yours.
What is a marketing plan?
A marketing plan is a document that a business uses to execute a marketing strategy. It is tactical in nature, and, as later sections of this article explore, it typically includes campaign objectives, buyer personas, competitive analysis, key performance indicators, an action plan, and a method for analyzing campaign results.
What is the purpose of a marketing plan?
In general, a marketing plan serves several purposes:
Streamline and organize marketing efforts
Guide businesses and their marketing teams through a sequence of marketing activities
Determine how to measure a campaign’s success
Effectively allocate the marketing campaign budget
A business might develop a marketing plan for a specific need, campaign, or goal within its larger mission. Here are some examples:
Launching a new product or service
Carrying out campaigns through different marketing channels, including social media , email marketing, print media, TV, or offline events
Implementing paid advertising
Measuring marketing efforts over specific periods of time, such as every quarter, six months, or year
Marketing plan vs. marketing strategy vs. business plan
In researching what a marketing plan is, you may come across the related concepts of marketing strategy and business plan. Think of all three as written roadmaps for developing your business. You’ll find similarities among them, including your business objectives and information on your target market, but there are some important differences to know as you build these roadmaps, as we’ve laid out in the chart below.
Review these roadmaps periodically to measure the success of your marketing and business efforts.
How to create a marketing plan
The following sections describe the components of a solid marketing plan and the steps to building each one. Develop each section in the order listed, and use insights from each section to guide your process in the ones that follow. Once you complete all of the sections, review your entire plan for areas that need refining.
1. Executive summary
Here, you will write a short summary, usually no longer than a few paragraphs, to introduce the sections that follow. In a few paragraphs, orient readers to the following:
General information about the business, such as its mission, past accomplishments and setbacks, and brand identity
Information specific to the marketing campaign driving this plan and how it will advance or improve upon past marketing efforts
You might choose to compose this section last, after you’ve written and refined the marketing plan as a whole.
2. Marketing campaign goals
Borrowing from your marketing strategy and business plan, state the marketing campaign's goals with specificity and data-driven metrics. For example:
Specify “get more email subscribers” as “increase email subscribers by 50 percent by next quarter.”
“Generate more online purchases” could be specified as “Drive traffic from paid Facebook ads to a sales page and increase the site’s conversion rate from 2 percent to 5 percent.”
3. Key performance indicators (KPIs)
KPIs are the specific metrics you’ll monitor to measure the success of your marketing efforts. It’s important to determine KPIs so that you can continually optimize your tactics, reduce inefficiencies, and steer your marketing campaign toward success.
KPI examples include:
The number of website visitors
The number of new email subscribers
The number of event registrants
The rate of converting leads into customers
Sales revenue figures
4. Buyer personas
Refer to your marketing strategy and business plan to crystalize target market insights into detailed buyer personas. You can think of a buyer persona as a fictional character that you create based on your existing customers and extensive market research. Building clear buyer personas helps to focus your marketing efforts and drive campaign results.
Answer these questions to get started:
What is this persona’s demographic profile, including age, income, location, occupation, etc?
Where do they go to find information?
What keywords do they use to search?
How do they prefer to purchase products and services?
At what times of the day are they most likely active on social media or other marketing channels, online or offline?
What words, phrases, and questions do they use to describe their challenges and goals?
Use answers to tailor every detail of your marketing campaign to your buyer persona and guide potential customers toward an action, such as subscribing to your email list or making a purchase.
5. Competitor analysis
Refer again to your marketing strategy and business plan to extract key information about how competing brands are reaching customers in your target market. Then, examine competitors’ marketing strategies in more detail.
Here are three ways to generate marketing-specific information about competitors:
Use SEO tools like SEMRush to discover how your competitors are leveraging popular keywords, content, and ad copy to attract an audience.
Study competitors’ social media accounts and note the content they post to engage followers.
Subscribe to competitors’ email lists to learn how they market and sell to potential leads right in their inboxes.
6. Action plan
Your campaign’s action plan should include the specific tactics and methods you’ll use to market your products and services to potential customers.
Include the following information in your action plan:
The campaign budget and target date of completion
Key milestones you need to pass on your way to achieving the goals
The marketing channels you will use, offline and online
The kinds of content you will create and your schedule for delivering it
Organic and paid marketing activities
7. Method of analyzing results
Your marketing plan should describe how you will monitor KPIs and analyze your campaign results at each milestone. That way, you can find out what’s working and what’s not and adjust your plan accordingly.
Be sure to set up analytic tools for each of your marketing channels, including your social media accounts, email system, website and landing pages, and event registration pages. Set calendar alerts based on your action plan for reviewing KPIs.
Which channels see the most traffic?
Which channels are converting at the highest rates?
How are individual pieces of content performing?
How efficiently is your budget performing?
Which metrics are improving, staying the same, or declining over time?
Marketing plan key takeaways
Remember: Having a solid marketing plan can make it possible to allocate your marketing budget effectively and streamline your marketing activities. By following the seven steps above, you may be able to see improvements in your marketing efforts, from attracting more ideal customers to inspiring them to take action.
Improve your marketing with Coursera
One way to become a skilled marketer is to take online courses and practice the latest strategies. Learn which web analytics tools are right for you, how to use them to analyze data, and more in the Digital Marketing Specialization or with Meta Social Media Marketing Professional Certificate .
What Is Content Marketing?
Digital Marketing: What it Is and How To Get Started
13 Key Marketing Skills to Boost Your Resume
9 Marketing Podcasts for Beginners and Pros: 2022 List
Market Analysis: What it Is and How To Conduct One
This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.
$1 unlocks unlimited opportunities
- For a limited time, get your first month of Coursera Plus for $1 .
- Get unlimited access to 7,000+ learning programs from world-class universities and companies like Google, Microsoft, and Yale.
- Build the skills you need to succeed, anytime you need them—whether you're starting your first job, switching to a new career, or advancing in your current role.
How to Use TAM, SAM, SOM to Determine Market Size
3 min. read
Updated October 27, 2023
Having viewed several business plans over the years, a common (and very important) item missing from most plans is a breakdown of the company’s TAM, SAM, and SOM.
Wondering what these acronyms mean? Well, you’re not alone—many entrepreneurs are not familiar with these terms.
- What is TAM?
TAM = Total Addressable/Available Market is the total market for your product. This is everyone in the world who could buy your product, regardless of the competition in the market.
- What is SAM?
SAM = Serviceable Available Market is the portion of the market that you can acquire. For example, your product may only be available in one language, so your SAM would be the subset of the TAM that speaks the language that your product is developed for.
- What is SOM?
SOM = Service Obtainable Market is the subset of your SAM that you will realistically get to use your product. This is effectively your target market that you will initially try to sell to.
- How do you identify TAM, SAM, and SOM?
Identifying your TAM, SAM, and SOM requires some market research (levels of research vary depending on your product and market potential), but once you gather the research through your market analysis , you’ll have a better idea of the percentages that coincide with each area.
- Why is identifying your SOM important?
Identifying your SOM, or your target marke t, is an important step because building a marketing plan around your TAM—in other words, everyone—is a huge waste of resources. Figuring out who exactly you think will actually buy your product will help focus your reach.
- What’s an example of TAM, SAM, SOM?
You’re starting a concierge service in your city that focuses on doing tasks/running errands for busy people.
Your TAM (total available market) would be all people who may have a need for help doing tasks and running errands in your town. If your town has 150,000 people, you may find (through market research) that the total possible demand for your business in your city is 33 percent (or 50,000 people). You might arrive at this number by excluding people who are under 18 years old and other groups of people who can’t purchase your services.
What’s your biggest business challenge right now?
Your SAM (serviceable available market) would be the portion of that 50,000 whom your current business model is targeting (this will be outlined in your business plan). For example, your business model focused on serving people who are ages 35 to 55, with small children and disposable income. You may then discover that there are 20,000 of these people, which means your SAM is 40 percent of your TAM.
Your SOM (serviceable obtainable market) would be the portion of your SAM that your business model can currently realistically serve. For example, you may only have three employees (yourself and two others) and can only serve people who live within a 2-mile radius of downtown, so realistically what percentage of your SAM (20,000 people) can you reach in the first 2 to 3 years?
Let’s assume your company can effectively provide concierge services to 100 people a month or 1,200 people a year. This means your SOM is about 6 percent of your SAM.
If you’re seeking funding, savvy investors will ask you for these items in your business plan, and they’ll want you to be able to back up your numbers. This is why conducting some market research upfront is important—and even advisable before you begin writing your business plan. It gives you the validation of your market potential.
Hopefully, this clears up a bit of the market reach acronym soup!
See why 1.2 million entrepreneurs have written their business plans with LivePlan
An entrepreneur. A disruptor. An advocate. Caroline has been the CEO and co-founder of two tech startups—one failed and one she sold. She is passionate about helping other entrepreneurs realize their full potential and learn how to step outside of their comfort zones to catalyze their growth. Caroline is currently executive director of Oregon RAIN . She provides strategic leadership for the organization’s personnel, development, stakeholder relations, and community partnerships. In her dual role as the venture catalyst manager, Cummings oversees the execution of RAIN’s Rural Venture Catalyst programs. She provides outreach and support to small and rural communities; she coaches and mentors regional entrepreneurs, builds strategic local partnerships, and leads educational workshops.
Table of Contents
2 Min. Read
Why You Should Care about Intellectual Property
6 Min. Read
How to Write a Business Plan in Under an Hour
3 Min. Read
How Long Should a Business Plan Be?
12 Min. Read
How to Write a Business Plan for a Daycare Center
The LivePlan Newsletter
Become a smarter, more strategic entrepreneur.
Your first monthly newsetter will be delivered soon..
The quickest way to turn a business idea into a business plan
Fill-in-the-blanks and automatic financials make it easy.
No thanks, I prefer writing 40-page documents.
Our biggest savings of the year
Black Friday Save 60%
for life on the #1 rated business plan software
We earn commissions if you shop through the links below. Read more
Business Plan vs. Marketing Plan
Back to Business Plans
Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on March 3, 2023 Updated on October 2, 2023
Starting a business usually requires both a business plan and a marketing plan. The first has many components, including a marketing section, and covers all facets of the business. The second is essentially an expanded and more detailed version of the marketing section of your business plan.
Both are dynamic documents that will change over time as you learn more about your business. This guide lays out all the details of what goes into a business plan and in a marketing plan.
- Business Plan Components
A business plan has eight essential components.
1. Executive Summary
The executive summary opens your business plan, but it’s the section you’ll write last. It summarizes the key points and highlights the most important aspects of your plan. Often investors and lenders will only read the executive summary; if it doesn’t capture their interest they’ll stop reading, so it’s important to make it as compelling as possible.
The components should include:
- The business opportunity – what problem are you solving in the market?
- Your idea, meaning the product or service you’re planning to offer, and why it solves the problem in the market better than other solutions.
- The history of the business so far – what have you done to this point? When you’re just getting started, this may be nothing more than coming up with the idea, choosing a business name, and forming a business entity.
- A summary of the industry, market size, your target customers, and the competition.
- A strong statement about how your company is going to stand out in the market – what will be your competitive advantage?
- A list of specific goals that you plan to achieve in the short term, such as developing your product, launching a marketing campaign, or hiring a key person.
- A summary of your financial plan including cost and sales projections and a break-even analysis.
- A summary of your management team, their roles, and the relevant experience that they have to serve in those roles.
- Your “ask”, if applicable, meaning what you’re requesting from the investor or lender. You’ll include the amount you’d like and how it will be spent, such as “We are seeking $50,000 in seed funding to develop our beta product”.
Remember that if you’re seeking capital, the executive summary could make or break your venture. Take your time and make sure it illustrates how your business is unique in the market and why you’ll succeed.
The executive summary should be no more than two pages long, so it’s important to capture the reader’s interest from the start.
2. Company Description/Overview
In this section, you’ll detail your full company history, such as how you came up with the idea for your business and any milestones or achievements.
You’ll also include your mission and vision statements. A mission statement explains what you’d like your business to achieve, its driving force, while a vision statement lays out your long-term plan in terms of growth.
A mission statement might be “Our company aims to make life easier for business owners with intuitive payroll software”, while a vision statement could be “Our objective is to become the go-to comprehensive HR software provider for companies around the globe.”
In this section, you’ll want to list your objectives – specific short-term goals. Examples might include “complete initial product development by ‘date’” or “hire two qualified sales people” or “launch the first version of the product”.
It’s best to divide this section into subsections – company history, mission and vision, and objectives.
3. Products or Services Offered
Here you’ll go into detail about what you’re offering, how it solves a problem in the market, and how it’s unique. Don’t be afraid to share information that is proprietary – investors and lenders are not out to steal your ideas.
Also specify how your product is developed or sourced. Are you manufacturing it or does it require technical development? Are you purchasing a product from a manufacturer or wholesaler?
You’ll also want to specify how you’ll sell your product or service. Will it be a subscription service or a one-time purchase? What is your target pricing? On what channels do you plan to sell your product or service, such as online or by direct sales in a store?
Basically, you’re describing what you’re going to sell and how you’ll make money.
4. Market Analysis
The market analysis is where you’re going to spend most of your time because it involves a lot of research. You should divide it into four sections.
Research and describe exactly what’s happening in your industry, such as growth rate, market size, and current trends. Where is the industry predicted to be in 10 years? Provide links to your sources.
Detail your company’s place in the market. Will your product fit a certain niche? Is there a sub-industry your company will fit into? How will you keep up with industry changes?
Now you’ll dig into your competition. Detail your main competitors and how they differentiate themselves in the market. For example, one competitor may advertise convenience while another touts superior quality. Also highlight your competitors’ weaknesses.
Next, explain how you’ll stand out. Detail your competitive advantages and how you’ll sustain them. This section is extremely important and will be a focus for investors and lenders.
Target market analysis
Here you’ll describe your target market and whether it’s different from your competitors’. For example, maybe you have a younger demographic in mind?
You’ll need to know more about your target market than demographics, though. You’ll want to explain the needs and wants of your ideal customers, how your offering solves their problem, and why they will choose your company.
You should also lay out where you’ll find them, where to place your marketing and where to sell your products. Learning this kind of detail requires going to the source – your potential customers. You can do online surveys or even in-person focus groups.
Your goal will be to uncover as much about these people as possible. When you start selling, you’ll want to keep learning about your customers. You may end up selling to a different target market than you originally thought, which could lead to a marketing shift.
SWOT stands for strengths, weaknesses, opportunities, and threats, and it’s one of the more common and helpful business planning tools.
First describe all the specific strengths of your company, such as the quality of your product or some unique feature, such as the experience of your management team. Talk about the elements that will make your company successful.
Next, acknowledge and explore possible weaknesses. You can’t say “none”, because no company is perfect, especially at the start. Maybe you lack funds or face a massive competitor. Whatever it is, detail how you will surmount this hurdle.
Next, talk about the opportunities your company has in the market. Perhaps you’re going to target an underserved segment, or have a technology plan that will help you surge past the competition.
Finally, examine potential threats. It could be a competitor that might try to replicate your product or rapidly advancing technology in your industry. Again, discuss your plans to handle such threats if they come to pass.
5. Marketing and Sales Strategies
Now it’s time to explain how you’re going to find potential customers and convert them into paying customers.
Marketing and advertising plan
When you did your target market analysis, you should have learned a lot about your potential customers, including where to find them. This should help you determine where to advertise.
Maybe you found that your target customers favor TikTok over Instagram and decided to spend more marketing dollars on TikTok. Detail all the marketing channels you plan to use and why.
Your target market analysis should also have given you information about what kind of message will resonate with your target customers. You should understand their needs and wants and how your product solves their problem, then convey that in your marketing.
Start by creating a value proposition, which should be no more than two sentences long and answer the following questions:
- What are you offering
- Whose problem does it solve
- What problem does it solve
- What benefits does it provide
- How is it better than competitor products
An example might be “Payroll software that will handle all the payroll needs of small business owners, making life easier for less.”
Whatever your value proposition, it should be at the heart of all of your marketing.
Sales strategy and tactics
Your sales strategy is a vision to persuade customers to buy, including where you’ll sell and how. For example, you may plan to sell only on your own website, or you may sell from both a physical location and online.
On the other hand, you may have a sales team that will make direct sales calls to potential customers, which is more common in business-to-business sales. Sales tactics are more about how you’re going to get them to buy after they reach your sales channel.
Even when selling online, you need something on your site that’s going to get them to go from a site visitor to a paying customer. By the same token, if you’re going to have a sales team making direct sales, what message are they going to deliver that will entice a sale?
It’s best for sales tactics to focus on the customer’s pain point and what value you’re bringing to the table, rather than being aggressively promotional about the greatness of your product.
Pricing is not an exact science and should depend on several factors. First, consider how you want your product or service to be perceived in the market. If your differentiator is to be the lowest price, position your company as the “discount” option.
Think Walmart, and price your products lower than the competition. If, on the other hand, you want to be the Mercedes of the market, then you’ll position your product as the luxury option.
Of course you’ll have to back this up with superior quality, but being the luxury option allows you to command higher prices. You can, of course, fall somewhere in the middle, but the point is that pricing is a matter of perception.
How you position your product in the market compared to the competition is a big factor in determining your price. Of course, you’ll have to consider your costs, as well as competitor prices. Obviously, your prices must cover your costs and allow you to make a good profit.
Whatever pricing strategy you choose, you’ll justify it in this section of your plan.
6. Operations and Management
This section is the real nuts and bolts of your business – how it operates on a day-to-day basis and who is operating it. Again, this section should be divided into subsections.
Your plan of operations should be specific, detailed and mainly logistical. Who will be doing what on a daily, weekly, and monthly basis? How will the business be managed and how will quality be assured? Be sure to detail your suppliers and how and when you’ll order raw materials.
This should also include the roles that will be filled and the various processes that will be part of everyday business operations. Just consider all the critical functions that must be handled for your business to be able to operate on an ongoing basis.
If your product involves technical development, you’ll describe your tech development plan with specific goals and milestones. The plan will also include how many people will be working on this development, and what needs to be done for goals to be met.
If your company is not a technology company, you’ll describe what technologies you plan to use to run your business or make your business more efficient. It could be process automation software, payroll software, or just laptops and tablets for your staff.
Management and organizational structure
Now you’ll describe who’s running the show. It may be just you when you’re starting out, so you’ll detail what your role will be and summarize your background. You’ll also go into detail about any managers that you plan to hire and when that will occur.
Essentially, you’re explaining your management structure and detailing why your strategy will enable smooth and efficient operations.
Ideally, at some point, you’ll have an organizational structure that is a hierarchy of your staff. Describe what you envision your organizational structure to be.
Detail who you’ve hired or plan to hire and for which roles. For example, you might have a developer, two sales people, and one customer service representative.
Describe each role and what qualifications are needed to perform those roles.
7. Financial Plan
Now, you’ll enter the dreaded world of finance. Many entrepreneurs struggle with this part, so you might want to engage a financial professional to help. A financial plan has five key elements.
Detail in a spreadsheet every cost you’ll incur before you open your doors. This should determine how much capital you’ll need to launch your business.
Creating financial projections, like many facets of business, is not an exact science. If your company has no history, financial projections can only be an educated guess.
First, come up with realistic sales projections. How much do you expect to sell each month? Lay out at least three years of sales projections, detailing monthly sales growth for the first year, then annually thereafter.
Calculate your monthly costs, keeping in mind that some costs will grow along with sales. Once you have your numbers projected and calculated, use them to create these three key financial statements:
- Profit and Loss Statement , also known as an income statement. This shows projected revenue and lists all costs, which are then deducted to show net profit or loss.
- Cash Flow Statement. This shows how much cash you have on hand at any given time. It will have a starting balance, projections of cash coming in, and cash going out, which will be used to calculate cash on hand at the end of the reporting period.
- Balance Sheet. This shows the net worth of the business, which is the assets of the business minus debts. Assets include equipment, cash, accounts receivables, inventory, and more. Debts include outstanding loan balances and accounts payable.
You’ll need monthly projected versions of each statement for the first year, then annual projections for the following two years.
The break-even point for your business is when costs and revenue are equal. Most startups operate at a loss for a period of time before they break even and start to make a profit. Your break-even analysis will project when your break-even point will occur, and will be informed by your profit and loss statement.
Funding requirements and sources
Lay out the funding you’ll need, when, and where you’ll get it. You’ll also explain what those funds will be used for at various points. If you’re in a high-growth industry that can attract investors, you’ll likely need various rounds of funding to launch and grow.
Key performance indicators (KPIs)
KPIs measure your company’s performance and can determine success. Many entrepreneurs only focus on the bottom line, but measuring specific KPIs helps find areas of improvement. Every business has certain crucial metrics.
If you sell only online, one of your key metrics might be your visitor conversion rate. You might do an analysis to learn why just one out of ten site visitors makes a purchase. Perhaps the purchase process is too complicated or your product descriptions are vague.
Learning why your conversion rate is low gives you a chance to improve it and boost sales.
In the appendices you can attach documents such as manager resumes or other documents that support your business plan.
- Marketing Plan Components
A marketing plan, as mentioned above, is a more detailed version of the marketing strategy section of your business plan. It includes six components.
1. Marketing Objectives
Start by detailing your short-term marketing goals. This could be “Reach 10,000 monthly site visitors by next year’” or “Acquire 500 new customers by May”. Be sure to set clear and attainable goals so your marketing team understands its targets.
2. Target Market
You’ll want to document exactly who you’re trying to reach with your marketing. You should’ve already done a target market analysis for your business plan, and you’ll use it here.
What Problem Are You Solving?
Whatever your product or service, it needs to solve a problem in the market. So, ask yourself, what problem does my business solve? Next, consider who faces that problem.
A plumbing company, for instance, solves the problem of broken pipes. Who deals with that problem? Homeowners and property owners and managers.
Depending on your business, it may not be obvious who has the problem you’re solving. If it’s not clear, do more research. Either way, knowing who faces the problem you’re solving is just the beginning. You need to know much more about your target customers.
Research Your Market and Competition
Now, dig into your market with some online research. Do some Google and Bing searches about your target demographic, where they shop and live, what appeals to them and so on.
Next, check out your competition to see who they’re marketing to. It may help to study their marketing through the eyes of a consumer.
What need do they fill? Who would find their marketing appealing? Where do they advertise? If their ads appear on TikTok, they’re looking to attract a younger market.
This market research should give you a general profile of your target market – but that’s not enough.
Talk to Potential Customers
To learn more about your target market, go straight to the source. The best way to learn their needs and wants, why they’d buy your product and how they’ll use it, is to ask them via a phone or email survey.
If you’ve yet to make any sales, it’s probably best to post your survey online then promote it on social media by offering a small reward, such as a gift certificate. Just make sure you ask the right questions to get the information you’re looking for.
You can also hold in-person focus groups and offer your goods at a discount for participants.
Create Customer Profiles
Now it’s time to build detailed profiles of your target customers. You may have found that your product will appeal to more than one group of people. These are called customer segments, and all your segments together make up your target market.
Create descriptions of each group with all the information you’re learned. These profiles should include:
- Pain points: the problems they have that you’re solving
- Benefits your product provides
- Their interests: what do they care about?
- Buying patterns: where do they shop?
- Age, location, income level, other factual information
3. Value Proposition
Now you can use these profiles to craft a value proposition that will serve as the foundation of all your marketing. You may need to devise more than one value proposition to target different segments.
Your value propositions should be no more than two sentences long and answer the following questions:
- How is it better than competitors’ products
An example might be “Payroll software that handles all the payroll needs of small business owners, making life easier for less.”
Remember that you need to align your value proposition with the wishes of your target market.
4. Marketing Activities
Now you’ll layout the specific marketing activities that you plan to conduct. Your target market analysis should have told you where you’re most likely to find potential customers, so if you found out that your potential customers use TikTok, you can post and run ads there.
You’ll want to only perform the marketing activities that are most likely to reach your potential customers so that you’re not wasting marketing dollars. If getting found online is important to you, focus on search engine optimization (SEO) and social media ads.
Make the activities as specific as possible, such as “Run a TikTok ad promoting ____ for three months.”
5. Marketing Budget
Now, determine what these activities will cost and set a budget. When you go through this process, you may find that you need to adjust your marketing to stick to the budget you can afford.
Your marketing budget needs to align with your goals. If one of your goals is to obtain 500 new customers, which will generate $10,000 in revenue, you can’t spend more than that on marketing. You have to make sure you’re getting a good return on your investment, or at least breaking even.
Now you’ll determine your key performance indicators (KPIs) to gauge the success of your marketing.
If you sell only online, one of your key marketing metrics might be your visitor conversion rate. You might do an analysis to learn why just one out of ten site visitors makes a purchase.
Perhaps the purchase process is too complicated or your product descriptions are vague. The point is, learning why your conversion rate is low gives you a chance to improve it and boost sales.
Similarly, if you’re not getting enough site visitors, you may need to revisit your SEO strategies.
A business plan outlines the overall mission, objectives, and strategies of a business, encompassing aspects like operations, finances, and organizational structure.
In contrast, a marketing plan focuses specifically on strategies and tactics to promote products or services, detailing target audiences, promotional methods, and market positioning.
While the business plan provides a comprehensive view of the entire business, the marketing plan hones in on attracting and retaining customers.
Leave a Reply Cancel reply
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.
Subscribe to Our Newsletter
Crafting the Perfect Business Plan: A Deep Dive with Upmetrics’ Vinay Kevadiya
Published on October 13, 2023
In the first segment of our conversation with Vinay Kevadiya, the visionary behind Upmetrics, we explored the platform’s origins and itsunique ...
LivePlan Software Review
Published on September 15, 2023
When you’re starting a business, a business plan is essential whether you’re going to obtain financing or not. Creating a business plan helpsyou ...
What to Include in Your Business Plan Appendix?
Published on September 13, 2023
Launching a business involves countless tasks, and one of the crucial early hurdles is writing a business plan. Many entrepreneurs who aren’tlooki ...
Access our collection of user-friendly templates for business planning, finance, sales, marketing, and management, designed to assist you in developing strategies for either launching a new business venture or expanding an existing one.
You can use the templates below as a starting point to create your startup business plan or map out how you will expand your existing business. Then meet with a SCORE mentor to get expert business planning advice and feedback on your business plan.
If writing a full business plan seems overwhelming, start with a one-page Business Model Canvas. Developed by Founder and CEO of Strategyzer, Alexander Osterwalder, it can be used to easily document your business concept.
Download this template to fill out the nine squares focusing on the different building blocks of any business:
- Value Proposition
- Customer Segments
- Customer Relationships
- Key Activities
- Key Resources
- Key Partners
- Cost Structure
- Revenue Streams
For help completing the Business Model Canvas Template, contact a SCORE business mentor for guidance
From creating a startup budget to managing cash flow for a growing business, keeping tabs on your business’s finances is essential to success. The templates below will help you monitor and manage your business’s financial situation, create financial projections and seek financing to start or grow your business.
This interactive calculator allows you to provide inputs and see a full estimated repayment schedule to plan your capital needs and cash flow.
Marketing helps your business build brand awareness, attract customers and create customer loyalty. Use these templates to forecast sales, develop your marketing strategy and map out your marketing budget and plan.
How healthy is your business? Are you missing out on potential growth opportunities or ignoring areas of weakness? Do you need to hire employees to reach your goals? The following templates will help you assess the state of your business and accomplish important management tasks.
Whether you are starting your business or established and looking to grow, our Business Healthcheck Tool will provide practical information and guidance.
Learn how having a SCORE mentor can be a valuable asset for your business. A SCORE mentor can provide guidance and support in various areas of business, including finance, marketing, and strategy. They can help you navigate challenges and make important decisions based on their expertise and experience. By seeking out a SCORE mentor, you can gain the guidance and support you need to help grow your business and achieve success.
SCORE offers free business mentoring to anyone that wants to start, currently owns, or is planning to close or sell a small business. To initiate the process, input your zip code in the designated area below. Then, complete the mentoring request form on the following page, including as much information as possible about your business. This information is used to match you with a mentor in your area. After submitting the request, you will receive an email from your mentor to arrange your first mentoring session.
Copyright © 2023 SCORE Association, SCORE.org
Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.
We've detected unusual activity from your computer network
To continue, please click the box below to let us know you're not a robot.
Why did this happen?
For inquiries related to this message please contact our support team and provide the reference ID below.
Hybrid vehicle sales surge in China, posing fresh threat to foreign automakers
A Li L7 electric SUV by Li Auto is displayed at the Auto Shanghai show, in Shanghai, China April 18, 2023. REUTERS/Aly Song/File Photo Acquire Licensing Rights
SHANGHAI, Nov 21 (Reuters) - As EV makers in China wage an intense price war to prop up slowing demand, Chinese brands with strong hybrid lineups are emerging as winners, attracting consumers with vehicles with long range that can cost less than gasoline cars.
The emerging trend may provide a glimmer of hope for global automakers such as Toyota (7203.T) and Honda who are pursuing "multi-pronged" electrification strategies, as electric vehicle (EV) sales lose momentum in Europe and the U.S., partly because of high auto financing costs.
One-third of total vehicle sales by Toyota, the world's top-selling automaker, are already hybrids and the company reported a 34% surge in hybrid sales in the six months to end-September, outpacing 9% growth in overall revenue.
Experts warn that foreign brands now face a growing threat from Chinese rivals that have conquered the domestic hybrid market and are looking overseas, emboldened by their strength as the world's lowest-cost EV producer after heavy investment in supply chains.
In the United States, most hybrid powertrains sell at a $1,500 to $2,000 premium to combustion models, but in China, some hybrids are offered at a slight discount to gasoline models and can be as much as 23% cheaper than pure EVs.
That price advantage is driving Chinese consumers to hybrid models, which work almost like pure EVs when they are used for short daily commutes, consuming little gasoline, analysts said.
"People are increasingly accepting that a car can be equipped with both an electric motor and a gasoline engine, as they are highly complementary," said Xu Min, a professor at Shanghai Jiao Tong University's Institute of Intelligent Vehicle. "Wherever the gasoline engine is low in efficiency, we can make up for it with the electric motor."
Two types of hybrids – plug-in hybrid (PHEV) and extended-range hybrid (EREV) - are enjoying strong demand, with their combined shipments surging 85% and outpacing a 14% growth in pure electric car sales this year, industry data showed.
The popularity of these hybrids is so strong that the segment is now half as big as the pure EV market and accounts for 12% of total passenger vehicle sales, according to data from China Association of Automobile Manufacturers (CAAM).
Li Auto (2015.HK) , the most popular extended-range hybrid seller in China, has thousands of customers waiting for delivery of its new large SUVs, a stark contrast with many other brands grappling with an unsold inventory buildup.
"The extended-range hybrids are the best option for Chinese drivers who want ... a solution to driving range anxiety, better fuel efficiency, smarter driving features and lower prices," said Yale Zhang, managing director at the consultancy Automotive Foresight.
In the PHEV market, BYD has cemented its position as the most dominant player, with eight of the 10 top-selling plug-in hybrid cars in China among its offerings.
A PHEV can be driven directly by the electric motor or the gasoline engine. An EREV has a larger battery pack and runs on electricity only, with its gasoline engine serving as a power bank to recharge the batteries when they run low.
The growing popularity of PHEVs and EREVs from Chinese firms, which dominated the top 10 best-selling EREV or PHEV models, have not only affected sales of gasoline cars but also gasoline hybrid vehicles (HEV), a segment Toyota pioneered with the Prius in late 1990s.
Sales of HEVs in China, which Toyota still dominates with four top-selling models, tumbled 15%, while gasoline car sales dropped 11%, underscoring potential challenges facing foreign automakers.
HEVs use gasoline for the main powertrain and come with a relatively small battery pack that is recharged during braking and used for auxiliary power. The sales slump for that type in China is partly a result of from government policy, which favours battery-driven hybrids by offering tax cuts for EVs, PHEVs and EREVs.
A foreign automaker was the first to crack the EREV market in China, only to cede it to local rivals: in 2017, General Motors (GM.N) launched the Buick Velite 5 as the first extended-range hybrid in China, two years before Li Auto started volume production.
But it was a failed trial, with sales of just over 4,000 units, and GM in 2020 halted sales. By contrast, Li Auto sold 244,225 EREVs in the first nine months of 2023.
The struggle of the likes of GM and Toyota is a stark reminder of growing threats posed by Chinese rivals now looking to export markets for growth.
BYD is expanding PHEV sales overseas, offering Han, Qin and Song lineups in Latin America, which has less charging infrastructure.
Stellantis (STLAM.MI) is investing $1.6 billion in Leapmotor and is interested in bringing the Chinese partner’s EREV hybrids to Europe, according to people with knowledge of the matter.
Stellantis told Reuters it does not exclude the possibility of cooperation with Leapmotor on new energy technology products. Leapmotor did not respond to a request for comment.
Xu at Jiao Tong University, however, noted that the difference in driver demands across markets could affect demand for Chinese cars.
In North America, for example, consumers would look for cars with bigger horsepower to tow trailers, enabling a bigger popularity for HEVs.
Still some are sceptical of the HEV's longer-term future.
"Conventional hybrid (HEV) is breathing life into a dying patient - the gasoline engine," said Bill Russo, CEO of Shanghai-based advisory firm Automobility.
Reporting by Zhang Yan and Brenda Goh; Editing by Miyoung Kim and Gerry Doyle
Our Standards: The Thomson Reuters Trust Principles.
S.Korean EV battery maker SK On seeks $3.1 bln in pre-IPO funding - newspaper
More from Reuters
VW struggling with S.Africa costs as group targets savings - executive
A senior Volkswagen executive involved in a global cost-cutting strategy said on Friday he was "very worried" about the future of the company's operations in South Africa, which is fighting persistent power cuts and logistics snarls.
White House stalls ethanol expansion in Midwest amid price concerns
Nissan invests $1.4 bln to build two new EV models in Britain
South Africans seek out Black Friday essentials as crunch continues
Take Five: Warming up this winter
BYD: The top electric car maker that is not Tesla
- Published 19 October
Electric car maker Tesla has a Chinese rival in its rear-view mirror.
Shares in BYD, or Build Your Dreams, jumped this week after it said it expected third-quarter profits to more than double compared with last year.
BYD is now ahead of Tesla in quarterly production - and second to the US car maker in global sales.
Its success is also a sign of just how much China's auto industry is growing - China overtook Japan this year to become the world's biggest exporter.
It's a bright spot in a sluggish Chinese economy that is reeling from a severe property crisis and record unemployment .
But, on the less bright side, Beijing's tensions are also growing with many of the countries - not least the US and European Union nations - that are export markets for its electric vehicles or EVs. As the world shifts to new, cleaner technologies, this is yet another example of how tough it will be for Western countries to move away from their reliance on Chinese goods.
How BYD built its dreams
It had an advantage from the start: unlike car makers who expanded to build electric models, BYD was originally a battery company that later started making cars.
Its chief executive Wang Chuanfu, now reportedly worth $18.7bn, was born in Wuwei County to a family of farmers in one of China's poorest provinces in 1966. Mr Wang was orphaned as a teenager and raised by his older brother and sister.
After earning degrees in engineering and the physical chemistry of metallurgy, he co-founded BYD along with his cousin in Shenzhen in 1995. The duo made a name for themselves as manufacturers of rechargeable batteries - used in smartphones, laptops and other electronics - that competed with pricier Japanese imports.
It became a publicly traded company in 2002. And it soon diversified by purchasing a struggling state-owned car manufacturer, Qinchuan Automobile Company.
EVs were still in their infancy then but Beijing officials were looking for a gap in the market that China could fill. In the early 2000s, they introduced subsidies and tax breaks as the government prioritised renewable energy production .
For BYD, it was the perfect timing. The batteries it had been making were effectively the engines that would power EVs.
In 2008, US billionaire investor Warren Buffett bought a 10% stake in BYD Auto, saying that it would one day become "the largest player in a global automobile market that was inevitably going electric".
And he was right. Today, China dominates global EV production largely because of BYD. And Beijing is keen to retain that lead - last June, it offered EVs $72.3bn worth of tax breaks over four years - the biggest incentive at a time when sales have slowed.
Analysts say BYD owes its growth to its original business - batteries. They are among the most expensive parts of an EV and making them in-house saves BYD a lot of money. Competitors, including Tesla, rely on third-party manufacturers for batteries.
"The BYD Seal has a 15% advantage over Tesla's Chinese-made base Model 3 sedan," according to a UBS report.
BYD's entry level EV - Seagull - sells at $11,000. Tesla recently unveiled a Model 3 sedan, whose starting price in China was almost $36,000.
And the Chinese company seems to be a hit beyond the EV market too - it beat Germany's Volkswagen as China's top-selling car brand earlier this year.
BYD versus Tesla
Elon Musk laughed during a 2011 television interview when asked about BYD and Chinese competitors. At the time, Tesla was still a young publicly traded company and had just unveiled a prototype of the first car they would launch - Model S.
Today, Mr Musk is probably regretting his response. Tesla sold 74,073 Chinese-made EVs in September, almost an 11% drop on the previous year, according to recent data from the China Passenger Car Association.
- Britain's impossible dilemma over China's electric cars
China's electric car market is booming but can it last?
This is in stark contrast to BYD, which sold 286,903 cars during the same period. That's an almost 43% jump in sales of EVs and petrol-electric hybrid models.
The ironic twist is that Tesla is credited with the growing popularity of EVs in China. Green incentives did not entice customers to buy EVs until Tesla arrived.
Even now, it is "one of the favourite EV brands in China," said auto analyst Ivan Lam from Counterpoint Research, adding that it is still popular among younger buyers.
When China, the world's largest car market, wanted to bring more EVs to the country, it loosened the rules to allow foreign firms to fully own manufacturing and sales operations in the country. Before that, companies such as General Motors and Toyota needed a local partner even to build a factory in China.
When that changed, Tesla jumped at the opportunity. Even today, Tesla is the largest exporter of China-made EVs and the second-biggest seller of EVs in China.
Mr Musk has ambitious plans to expand his footprint in China and build enormous, battery warehouses that would act as an EV grid of sorts, powering charging stations.
But as tensions between Washington and Beijing grow, he has also turned his attention to India, which is selling itself as an alternative competitor to the Chinese market. Mr Musk has said Tesla will be in India "as soon as humanly possible" after a meeting last June with Indian Prime Minister Narendra Modi.
Will Chinese EVs win the race?
The lane is quickly narrowing for legacy car makers, whose business is still powered by fuel engines. Analysts predict a seismic shift by 2030 as green incentives to combat climate change expand.
Car manufacturers from Europe and the UK are struggling to compete. But wariness of China might prompt regulation that will make Europe's market less accessible to competitive Chinese car makers.
The European Commission has launched an investigation into whether to set tariffs to protect EU manufacturers from a "flood" of imported, cheaper Chinese EVs, which it says benefit from Beijing's subsidies. Its president Ursula von der Leyen said the EU had not forgotten how its solar industry was hit by China's "unfair trade practices".
But for now, BYD's affordable, green cars are a hit in Germany, which is grappling with high inflation and energy costs.
The home of Mercedes-Benz, BMW and Volkswagen is struggling to keep up its production of EVs to the global market and the evidence was on display at Europe's biggest car show in Munich in September - Chinese EVs were the hot topic.
"There's demand everywhere in the world for affordability. And that's a universal value proposition," says Bill Russo, the founder and CEO of Automobility.
And the place that can offer that to the world right now, he adds, is China.
- Electric cars
Musk vows to bring Tesla to India after meeting Modi
- Published 21 June
Tesla to build new battery factory in Shanghai
- Published 10 April
Tesla sees record deliveries after price cuts
- Published 3 July
- Published 11 October 2022