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Prepared By: Melissa C. Marsh, Los Angeles Business Attorney
Written: March 2009

How To Write A Business Plan - Describing Your Market

This section of a business plan should be designed to convince an investor, potential partner or other reader that your business has sufficient customers in a growing industry, and can garner sales despite the competition. It is one of the most important parts of the plan, and generally will require extensive research.

A Business Plan Must Identify Your Targeted Customer

When creating the description of your targeted consumer, it is important to be thorough yet specific and to use common identifiable characteristics (e.g., professional women located in the western United States). This description defines the characteristics of the people you want and do not want to sell to and should indicate, among other things, whether your customers are cost or quality conscious, and under what circumstances they buy. If you have an existing business, list your current customers and the trend in your sales to them.

A Business Plan Should Describe Your Market Size and Trends

Once you have describe your targeted customer, you should then define the size of your target market and its potential for growth. Remember to cite the sources of your data. When preparing this description be sure to use as many characteristics to describe the companies or consumers likely to buy your product or service (e.g. geography, company size, business organization, lifestyle, sex, age, occupation, etc…). You should then mention various industry trends, socioeconomic trends, government policy, and population shifts, and discuss how these trends will positively or negatively impact your specific business.

Believe It Or Not, You Should Identify Your Competition in a Business Plan

After describing your targeted customer and your market, you should then provide a realistic view of the competitive landscape and explain where your products/services fit in the competitive environment. Define the competitive field broadly, as it is important for you to show the reader that you understand the competitive landscape and are prepared to cope with the roadblocks to success. You can do this by taking each of your primary competitors and briefly describing their annual sales, present market share, and why you believe you can capture some of their market share (e.g., evaluate your competitor's perceived strengths and weaknesses and compare them to yours with respect to price, value, service, convenience, quality, production capabilities, image, and/or the breadth of products/services). You may even want to include a table that reflects your competitive analysis, so the reader can quickly evaluate your competition.

Your Estimated Sales

In this final sub-section you should present the reader with a three (3) year projection of your sales both in units and dollars. Your figures should not be pure conjecture, but based on factual research and your assessment of: (1) the size of your market, (2) your customers, and (3) the advantages of your product or service in light of your competition. You may even want to provide the reader with "best case," "worst case," and "likely" scenario to create a spectrum of sales projections. Your sales projections should then be followed by a summary paragraph that justifies your projections (e.g. a succinct statement of what sets you apart from your competition, any customer commitments, and how you will garner this business.

Go to: Writing a Business Plan, Part V – Development and Production.

Related Articles:

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• Writing a Business Plan, Part I - Executive Summary.
• Writing a Business Plan, Part II – Your Business Description.
• Writing a Business Plan, Part III – Management.
• Writing a Business Plan, Part IV – The Market.
• Writing a Business Plan, Part V – Development & Production.
• Writing a Business Plan, Part VI – Sales and Marketing.
• Writing a Business Plan, Part VII – Financials.

© 2009 Melissa C. Marsh. All Rights Reserved.