The market analysis in a business plan is the section that proves there are enough of the right customers to build a business on, and that you understand them better than the competition does. It answers four questions in order: how big is the market, who exactly is the customer, is demand growing or shrinking, and why are you positioned to win a share of it. Done well, it turns your plan from a hopeful story into a researched case a lender or investor can believe.
What a market analysis is, and what it proves
A market analysisis the evidence layer of your plan. Reviewers do not fund conviction; they fund demonstrated demand. This section shows the size and shape of your market, the specific customer you serve, and the competitive gap you fill, each claim tied to a source rather than an opinion. From the lender's side of the desk, a weak market analysis is the fastest way to lose confidence in everything that follows, because if the demand is not real, the projections cannot be either.
What to include in a market analysis
The section has four standard parts. Cover each, in this order:
- Industry analysis — the size, growth rate, and trends of the industry you operate in, with sourced figures.
- Target market — exactly who buys, their demographics or firmographics, and how many of them there are.
- Competitive analysis — who you are up against and where the gap is. We treat this in depth in the competitive analysis guide.
- Barriers to entry — what stops the next entrant from taking your share, and how you clear those barriers yourself.
How to write a market analysis, step by step
Start top-down to frame the opportunity, then go bottom-up to make it credible, and finish by connecting every number back to your business. The discipline that separates a fundable market analysis from a generic one is relentless relevance: a statistic that does not change a decision about your business does not belong in the section. Move supporting tables and raw data to the appendix and keep the narrative to the figures that matter.
Industry analysis: sizing the market
Open with the industry's total size and its direction. Pull figures from real sources — IBISWorld, Statista, trade associations, or government data — and cite the year, because a reviewer will discount an unsourced number to zero. Then narrow from the whole industry to the slice you can actually serve. The cleanest way to show this is the market sizing funnel from total market to serviceable market to the share you realistically capture, so the reader sees both ambition and realism in one view.
Target market analysis
A market is not "everyone." The strongest plans name a specific customer and quantify them: for a B2C product, the demographics, location, and spending behavior; for B2B, the company size, industry, and the buyer's role. As an illustration, "urban professionals aged 25–40 within a three-mile radius who buy specialty coffee twice a week" is fundable; "coffee drinkers" is not. The tighter the definition, the more credible your customer acquisition plan and your revenue forecast become.
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Get a business plan quoteCommon market analysis mistakes
- Citing a giant total market with no path to a realistic, serviceable share.
- Unsourced or undated statistics that a reviewer cannot verify.
- Defining the target market so broadly it tells the reader nothing.
- Listing data without relating it back to your product and pricing.
- Treating competition as an afterthought instead of a core part of the analysis.
The market analysis sits between your company description and your financial projections, and the demand it proves is exactly what your marketing plan sets out to capture, so the two must agree. If you would rather have it researched and written to a fundable standard, our how to write a business plan guide shows how the section fits the whole document.
