How to write market research of a business plan
The market research section of your business plan is critical because if you analyze your market wrongly, the business is bound to fail. This is why you must learn all you can about what the market research is and what it does to your business, and learning how to write the market research section of your business plan is just as critical too.
What is market research?
Market research is an attempt to study and understand why consumers (customers, clients, users, etc) will buy what you are offering – whether it is a product or a service. Any activities that you are involved with in the process of acquiring that information and gaining this understanding is what market we refer to as market research.
The market research section is what usually comes next to the product and service section when writing a business plan and what you are expected to tell your audience or readers in this section is comprehensive information about your industry in which your business will operate and in which your product and services will be sold. When doing this, facts and figures – verified statistics to back up your claims. In studying the market, you will look at things like the size of the market, customer segments within the market, the competitions within the market, the buying patterns in the market, regulations within the market (if any), and other important market elements.
Types of market research?
There are two main types or, let’s call it, approach to market research: primary and secondary.
- Primary research: this is the type of research in which you go all out to directly observe and study your target customers to extract the information you need through direct observation of their actions, inactions, and responses to market stimuli.
- Secondary market research: this is research in which your facts and figures and your conclusions are drawn by studying existing researches that other people have done in a similar space.
What Should a Market Analysis Include?
When writing your business plan, especially when you get to the market research section, you need to pay a lot of attention as your analysis at this point must be accurate. The market research section of your business plan should not be void of the following important items
- The description of your industry: you want your readers to know that you have an understanding of what is going on in the industry. This is important because, if you lack the most basic knowledge about how the industry rolls, your chances of success in the industry is very slim – and any investor or lender sees it just that way!
- Your target market: you must be able to clearly describe your ideal customer within the market. If customers within your industry are segmented correctly, you’ll soon find out that you probably cannot serve all the customer segments there is – and I can spend the next three hours explaining that! So, there comes the need for you to identify which of the customer segments you should target and focus on. More than that, you have to know why and how your target customers buy – and why they will buy from you
- Competition: it will be unwise for you to be thinking about what you want to do in any industry without having a peep into what your competitors within the same industry are doing. So, it is important for you to have look at what your competitors are doing – identify their areas of strengths and weaknesses, this helps you to take advantage of their weaknesses, imbibe their strengths and improve on them.
- Regulations and approvals: it is important to know if there are regulations within the industry or registrations that must be done. For instance, if you are into the production of food items in Nigeria, registration with the National Agency For Food And Drugs Administration And Control (NAFDAC). If you are thinking of starting a pharmacy, registration with the Pharmaceutical Council Of Nigeria becomes inevitable. You cannot afford to be ignorant of such issues within your industry as it can make you not just to lose money, it can get you in serious trouble that won’t go away for years to come. So, do your research very well, and if any such thing exists in your industry, it must be part of what is documented in the market research secti0n of your business plan.
Read Also: How to write financials of a business plan
How to write the market research section of your business plan
The following tips on how to write the market research section of your business plan are not necessarily exhaustive but they have proven to be a good guide which has helped many people navigate the writing of the market research section of their business plans and it sure will help you too.
- Start with the internet
The internet is the best friend of anyone who wants to do any kind of research today. The internet is vast and holds a collection of information you could not even expect to find there and when writing the market research section of a business plan, the internet will prove to be a good place to start gathering your thoughts and data, especially if you are dealing with an industry in which you have no previous experience. Demographic data can give you a great insight into some of the things you need to know about your customers and the National Bureau of Statistics and other data holding agencies has all these data available online for public access. You can take advantage of that. Even when you can’t get all the data you need on the internet (although this might also be due to your level of expertise in searching the internet), the internet will give you some leads that will inform you on where to go next to get what you want. For instance, there are certain data you may not be able to access online due to certain regulation issues with the body that hold such data (although this is a very rare case), the internet can at least help you by providing the information on where you could go get the needed data.
- Put yourself in the customers’ shoes
Many times business owners make claims about the results they expect in a venture without any form of research backing up their claims. Most entrepreneurs are optimists and enthusiasts by nature and so whenever they are talking about the results they envisage in a business they are planning to start, “their mouths are usually very sweet”. While optimism is a good thing in business, one of the things that help you to correctly evaluate your business opportunity is to look at your products and services through the eyes of your customers. If you relate with your products and services from the viewpoint of a producer or business owner alone, you will most likely miss critical information that can help you position your business correctly in terms of product specification, pricing, and so on. For instance, I created a product recently, and to get direct opinions from the very same set of people that I intend to sell the product to, I gave out the very first set we produced out for free so people could use it as a test and give us feedback. This is quite important.
- Give it time and be patient
Market research takes time. There are some information you won’t get online as I said earlier. There will be critical information you will only have access to through direct observation of the market. When you are planning to run a business that will succeed for a long time to come, the quality of your research will play a key role and you should be willing to spend time and do not make critical decisions until you have gained the required information and understanding from the market.
- Write your findings as a report
This is the point where you input all of your findings around the points I have raised above as a write-up to be included in your business plan. That becomes the market research section of your business plan. When doing this, be concise but ensure that important details are not missed out. Meanwhile, do not forget to support your claims with facts and figures, and relevant data where necessary. You can even use visuals such as graphs, charts, or pictures where appropriate.
- Tie everything together to how it achieves your business goals
Don’t forget, every research is conducted towards a goal. In all, you must ensure that all your research and information gathering is used to prove the viability and profitability of your business. That is exactly what we want to do, that’s the purpose of the market research.
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