There are many reasons why you might need to conduct a market analysis. You might need to include one in your business plan. Conversely, you could do one to see what the future looks like in your field. The general steps to performing an analysis are the same, no matter what type of business you run.
According to the Small Business Administration (SBA), there are more than 400,000 small businesses started every year, but there are almost as many closures. You can perform a market analysis at any time to get a handle on the current state of the industry. Knowing the likely growth rate of your company and that of your competitors helps you plan for downturns. It also enables you to boost your savings and invest in your business during upticks.
Here are some basic steps you should take when gathering data for evaluation:
1. Find the Purpose
Why do you wish to conduct a market analysis at this time? You might want to see what risks lie ahead, reduce problem areas or find new opportunities you’ve not yet explored. The type of research you do will also depend upon whether you’ll use the data for your purposes or share it with the outside world, such as when securing a small business loan.
Look for information on your competitors, such as data about their landing pages and their business strengths and weaknesses. The depth of research you do also depends upon who will see the final report and how you plan to use it.
2. Map the Possibilities
Part of studying the business landscape involves figuring out future possibilities for growth. Business mapping software shows you what areas you currently serve and creates a report of places you could send salespeople. You can also plug in data and look at what your competitors do.
For example, if your competitors are already in a particular area, it might be best to seek out a different location while your company is still young. On the other hand, if their clients are unhappy, you may decide to go after the same customers and establish a rapport.
3. Look at Global Positioning
Create a section of your analysis for the entire industry, including trends and growth potential. While this information isn’t as specific as looking at trajectories of your nearest competitor and your own company’s growth, it does show you’ve researched the topic in-depth. It also means you understand the challenges involved with running and maintaining your organization.
If you run a local business, such as heating and cooling services, your industry insight might be a bit different. You might restrict your findings to a specific region, such as the South or the North.
4. Figure Out Your Target Audience
One of the most significant benefits of creating a market analysis is discovering who your typical customer is. A thorough evaluation should also consider who isn’t yet your customer but should be. Look at demographics, behaviors and psychological factors for your target audience. You may want to use this information to create a buyer persona for internal use. The more information you have, the more specific your persona becomes.
5. Create Charts
Once you have all the info on your company, plus the projected growth of your competitors and the industry itself, turn that information into visual assets. Make a pie chart or a bar graph and display possible growth rates over time. If the analysis is just for your use, print out the graph and hang it on the wall as a target goal.
When you see the graph, you’ll remember what you’re trying to achieve numbers-wise. A chart breaks down complicated concepts within your business plan.
If you’re seeking a loan and you hand a 45-page report to a banker, they aren’t likely to look through every line of it. They will flip through it and scan for key points. Images allow them to process the information much faster and decide whether you’re worth the risk.
6. Conduct Surveys
If you’ve created one or more buyer personas during your analysis, you can gather even more information by conducting surveys of each segment of your audience. If you’re planning to add a product or service, reach out to consumers and ask about their thoughts on that change. Is it something they would buy or enjoy? Polling even a small portion of your potential audience allows you to gauge the interest in major changes before implementing them.
Whether you plan to use your market analysis for advertising or share it with the world, you should put everything into a final report you can refer back to. The analysis stage requires looking at the data you’ve gathered and developing predictions about your company for the next few years.
The more details you have, the more of an educated guess you can make about possible growth and potential challenges you’ll need to overcome. At a minimum, you’ll spend time thinking through your goals for the organization and alleviate the fear of unknown problems.
Lexie is a digital nomad and graphic designer. She enjoys hiking with her goldendoodle and creating new cookie recipes. Check out her design blog, Design Roast, and connect with her on Twitter @lexieludesigner.