How To Do A Perfect Market Opportunity Analysis In A Business Plan

Analyzing the market opportunity is one of the most important key parts of any business. A market opportunity analysis includes available technology, financial capabilities, along competitive readiness to take any action.  

To grow your business and increase your sales, market opportunity analysis plays a vital role.  

But you need to make sure that you are analyzing the market opportunity in the right way. Otherwise, all your hard work and time will be wasted.  

Going in the right direction is very crucial for any business and its strategies. So, first, start with gathering some basic knowledge about market opportunity analysis.  

What Is Market Opportunity Analysis? 

Market opportunity analysis is nothing but studying the dynamic and attractiveness of a market within a specific industry. It is basically a part of the global environmental analysis.  

The elements of market opportunity analysis are: 

• Market size. 

• The market growth rate. 

• Market trends. 

• The market profitability. 

• Market opportunity. 

• Distribution channel. 

• Industry cost structure. 

• Success factors. 

• And lastly, applications.  

How To Do A Perfect Market Opportunity Analysis In A Business Plan – Step-By-Step 

Analyzing the perfect business opportunity is not at all a matter of joke. The whole process takes a lot of time, effort, and, of course, tons of research.  

So, here is a step-by-step guide on how to do a perfect market opportunity analysis.  

1. Know What Is Happening In The Recent Business Environment

Here, you need to have a close look at the economic conditions. Whether the economic condition of the business is growing, stable, or having a declining graph. 

You also require checking for any social changes or trends that may affect the business. Consider both the regulatory and legal situations here.  

As they are the most prone to changes and be prepared and ready for any expected future changes.  

Research the state-of-the-art developments along with all the latest technology. Take the natural environment into account. Properly look for any limitations or vulnerabilities on resources that may hinder your growth.  

2. Define The Industry Along With Determining The Outlook

While analyzing the market opportunity, you must shape the same industry in which you are operating, and based on the market size, do not forget to make forecasts.  

Look five years or more back, and based on that project, your thoughts on how it can grow in the next 12 months, or three years or five years.  

Look at your competitors and check all the marketing techniques that they are utilizing. By doing this, you also can check for any new major trends or changes happening within your industry.  

You will have some major implications for different potential opportunities; after all, you need to ensure that you are moving in the exact same direction as the market.  

3. Look for More Details About Your Competitors

As they say, know your competitors better than themselves. So, you must have some clear idea about the businesses you are competing with. Know their products from the inside out, along with the product mix.  

Now, compare the details with your products to analyze the market opportunity.  

Always remember that your intention is to identify all the strengths and weaknesses of those products from your customers’ point of view.  

How do you identify that?  

Well, some more research.  

Get knowledge about how your competitors reach the market, which channels they are using to perform the marketing, and the distribution of their products.  

In your research, also include the level of service your competitors are providing, then sum it up in a few sentences to identify the available market opportunities.  

4. Describe Your Target Market

You should build a profile of your target customers for market opportunity analysis. This will help you to be focused on your marketing focus and sales and reach your customers.  

In case you have not started with your marketing plan, then consider building the customers at the very beginning as it will help you to understand and strategize to reach the target market. This is to guide your progress, there are several templates available.  

And in case you get stuck at some point, you can try by asking some questions yourself.

Here are the questions: 

• Who are your potential customers? 

• As a consumer, what are your potential customers like? 

• What are your potential customers searching for? 

• When is the product required? 

• Is there a channel where your products will sell best? 

• How do your potential customers decide to buy a product? 

• Are their buying decisions being affected by any outside influences? 

• Can any limitations influence the opportunity level? 

• How is your industry market developing and changing? 

The answers to these questions will help you to figure out your customers. Always remember that the goal is to satisfy the end-users and fulfill their requirements.  

5. Now, Develop Your Projection

You need to use various techniques to build all the information for your business plan. It is to set the forecasts for your sales.  

At the same time, you need to put effort into both the worst and best scenario analysis. In case of any gut feelings, always check with the market for reassurance! 

The final and ultimate recommendation in any market opportunity analysis is nothing but a very simple answer to the question – 

Is the planned project a go or a no-go in the business markets? 

When it doubts your business plan, always ask yourself the right questions, and with time you should be able to solve it! 

Financial Forecasting – The Most Important Thing 

If you are worried about maintaining a continuous cash flow for your new business, here is what you should look into… 

To convert your market opportunity analysis into meaningful results, it is crucial to build a financial forecast.  

This will help you to understand the potential profitability and the monetary sustainability of your business opportunity. 

A. Revenue Projections

How much can you earn from this business? Is it even lucrative? 

Understand the maximum revenue you can generate by considering your market size, growth rate, and the percentage of the market share.  

The next thing to keep in mind is to consider different pricing strategies with your target customers before finalizing one. 

B. Cost Analysis

Understand all possible costs, including production, marketing & sales, distribution, and operational costs.  

Next, define the fixed vs variable cost structure and how they change as your business scales. 

Finally, consider the important expenditures and mark the ones that are luxury. Yes, even a business plan can have luxuries! 

C. Break-Even Analysis

If it is a tangible business, you will have some investment to make! 

It is time to estimate how much you will need to sell to pay back your initial investment (i.e., reach the break-even point). 

Then, when you start making a profit, estimate how much you sold in one year to reach that number.  

Doing some pre-start-up math will give you a glimpse of what it takes to make that “all-important” financial plan, especially after your business has survived for a year. 

D. Cash Flow Assessment

Estimate the amount of cash coming into your company and then list your expected monthly expenses.  

Most Important! (note this because many first-time business planners forget this). 

Consider unexpected circumstances such as slow-pay or no-pay customers, increasing financial costs, supply chain disruptions, etc. 

E. Profitability Analysis

We come back to the same question! 

Is my business lucrative? Or will it just remain a hobby project? 

So, determine how profitable your business opportunity can be by evaluating your expected revenue and costs.  

Look at indicators such as gross margin, net profit margin, and return on investment (ROI) to get insights into the financial feasibility of the business opportunity. 

Financial forecasting, matched with market opportunity analysis, helps you make better decisions, reduce risks, and estimate business potential regarding monetary growth. 

Final Tips

It simply does not matter what your business is all about or how big or small your business is; the main intention of any business is to increase its sales.  

To increase sales, you first need to prioritize what your target audiences are searching for and what they are thinking about your product; apart from that, analyze your industry market, its future, and your competitors as well. 

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