How to Do Market Analysis for a Business Plan (Step-by-Step)

The market analysis section is one of the most important — and most poorly executed — parts of a business plan. Done well, it demonstrates you understand your industry deeply and have identified a real, sizeable opportunity. Done poorly, it is a collection of generic statistics that tells investors and lenders nothing useful.

This guide walks through every component of a thorough market analysis, with real examples and tool recommendations for each step.

What a Market Analysis Must Answer

A strong market analysis answers five questions:

1. How big is the market, and is it growing?
2. Who exactly is the customer, and what do they need?
3. Who are the existing competitors, and how do they position themselves?
4. What is your market share target, and why is it achievable?
5. What market trends create an opportunity for your business right now?

Section 1: Industry Overview

Start with the macro picture of your industry. Include:

• Total industry size (revenue, number of businesses, employees)
• Growth rate over the past three to five years
• Key drivers of growth (technology shifts, regulation, demographic change)
• Key risks or headwinds
• Major players and market concentration

Section 2: Target Market Definition

The most common market analysis mistake is defining the target market too broadly. A credible analysis segments the market and defines a specific beachhead:

• Geographic segment: Which regions, countries or cities you initially serve
• Demographic segment: Age, company size, industry vertical, job role
• Behavioural segment: The specific trigger, problem or workflow that makes someone a customer
• Psychographic segment: Values, risk tolerance, technology adoption curve position

Build a detailed customer persona — one or two specific fictional customer profiles representing your best target segments. Name them, give them a job title, describe their day, explain why your product solves a problem they currently struggle with.

Section 3: Market Size — TAM, SAM and SOM

Market sizing uses three nested concepts:

• TAM (Total Addressable Market): The total revenue opportunity if you captured 100% of the market
• SAM (Serviceable Addressable Market): The portion of TAM you can realistically target with your current product and go-to-market
• SOM (Serviceable Obtainable Market): The share of SAM you can realistically capture in years one through three

Two approaches to sizing the market: top-down (start from published industry figures and work down) and bottom-up (start from the number of potential customers, multiply by realistic annual revenue per customer). Bottom-up is more credible because it forces specificity.

Section 4: Competitive Landscape Analysis

The competitive landscape section answers: "Who else is already solving this problem, and why will customers choose you?"

Identify Your Competitors

Include both direct competitors (same product, same customer) and indirect alternatives (different approach to the same problem). A list of six to twelve competitors is typically appropriate for a business plan market analysis.

Analyse Each Competitor

For each, document pricing, target customer, main strengths and notable weaknesses. BenchSpy is particularly useful here: paste any competitor URL and receive an AI-generated report covering their positioning, tech stack, content strategy, SWOT analysis and SEO performance in 60 seconds. This level of competitor intelligence — covering ten competitors in a morning — would previously have required days of manual research.

Build a Competitive Positioning Map

Plot competitors on two dimensions that matter for your market. Show where the white space is that your business will occupy.

Articulate Your Competitive Advantage

Be specific. "We have better customer service" is not a sustainable competitive advantage. A specific, geographic or feature-based advantage that is genuinely defensible is what investors want to see.

Section 5: Market Trends and Tailwinds

Identify two to four macro trends that create the current window of opportunity for your business. These might include regulatory changes, technology shifts, behavioural changes or economic conditions driving adoption of your type of product.

Section 6: Market Share Projections

Project your market share capture for years one through three. Be realistic and show your working. A new entrant capturing 0.1-1% of SAM in year one is credible. Connect your projections to specific, concrete assumptions: number of customers acquired, revenue per customer, and the channels through which you acquire them.

Conclusion

A strong market analysis combines industry data, specific customer profiling, rigorous competitive research and bottom-up market sizing. Use tools like BenchSpy to accelerate the competitive landscape section, industry databases for market size data, and customer interviews to validate your target market assumptions. The result should be a section that convinces any reader that you understand your market more deeply than the average entrant — because you do.