How to Write the Market Analysis Section of Your Business Plan

Why the Market Analysis Section Makes or Breaks Your Plan

The market analysis is where you prove that your business opportunity is real, not imagined. It answers three questions every investor and lender asks: Is the market big enough? Is it growing? And can you realistically capture a share of it?

Weak market analysis is one of the top reasons business plans get rejected. Vague claims like "the market is worth billions" or "everyone needs our product" signal that the founder has not done the work. A strong market analysis uses specific data, cites credible sources, and connects macro market trends to your specific business opportunity.

TAM, SAM, SOM: Market Sizing That Makes Sense

The TAM/SAM/SOM framework is the standard approach for sizing your market opportunity. Here is what each level means and how to calculate them.

Total Addressable Market (TAM)

The total revenue opportunity if you captured 100% of the market. This is the biggest number and represents the theoretical ceiling. For example, if you are launching a project management tool: the global project management software market is approximately $7.1 billion (Grand View Research, 2025).

How to calculate: Use top-down industry reports from IBISWorld, Statista, Grand View Research, or Mordor Intelligence. Alternatively, calculate bottom-up: number of potential customers x annual value per customer.

Serviceable Addressable Market (SAM)

The portion of TAM that your business can realistically reach with your current business model, geographic focus, and product capabilities. For the project management tool example: if you only serve small businesses (1-50 employees) in the United States, your SAM might be $850 million.

How to calculate: Filter TAM by geography, customer segment, pricing tier, and distribution capabilities. This number should be defensible -- explain exactly what filters you applied and why.

Serviceable Obtainable Market (SOM)

The portion of SAM you can realistically capture in your first 3-5 years. This is the number investors care about most because it drives your revenue projections. For the project management tool: with a focused sales strategy targeting freelancers and agencies, you might project capturing 0.5% of your SAM, or $4.25 million in annual revenue by Year 3.

How to calculate: Base this on your marketing budget, sales capacity, and comparable company growth rates. A SOM that represents more than 5% of your SAM in Year 1 will raise eyebrows unless you have a strong justification.

Where to Find Reliable Market Data

Your market analysis is only as credible as your sources. Here are the most reliable places to find data:

Free Sources

• U.S. Census Bureau: Demographic data, economic census, County Business Patterns
• Bureau of Labor Statistics: Industry employment data, wage data, occupational outlook
• FRED (Federal Reserve Economic Data): Economic indicators, industry trends
• SEC filings: Publicly traded competitors' 10-K filings contain market size estimates and competitive landscape descriptions
• SBA Office of Advocacy: Small business statistics by industry and region
• Google Trends: Search interest over time for relevant keywords

Paid Sources

• IBISWorld: Industry reports with market size, growth rates, and competitive landscape ($1,000-$3,000 per report, but many libraries provide free access)
• Statista: Statistical data and market forecasts ($39-$1,188/month)
• Grand View Research and Mordor Intelligence: Detailed market sizing and forecasts for specific niches

Pro tip: Many public libraries provide free access to IBISWorld, Statista, and other premium databases. Check your local library's digital resources before paying.

Competitor Analysis: Mapping the Landscape

A strong competitor analysis goes beyond listing competitors. It maps the competitive landscape in a way that reveals your positioning opportunity. For a detailed guide, see our post on how to research and present competitive analysis.

Identify Your Competitors

Categorize competitors into three groups:

• Direct competitors: Businesses offering the same product/service to the same customers
• Indirect competitors: Businesses solving the same problem with a different approach
• Substitute competitors: Alternatives customers use instead, including doing nothing

Competitive Positioning Map

Create a 2x2 matrix plotting competitors on two axes that matter to your target customers. Common axes include price vs. quality, features vs. simplicity, or specialization vs. breadth. Your business should occupy a clearly differentiated position -- ideally one with meaningful customer demand but limited competition.

What to Include for Each Competitor

• Name, location, and years in business
• Estimated revenue or market share (SEC filings, press releases, or tools like SimilarWeb for web traffic)
• Pricing model and price points
• Key strengths and weaknesses
• Target customer segment
• What you do differently and why it matters

Market Trends and Growth Drivers

Identify 3-5 trends that support your business opportunity. These should be specific and data-backed:

• Demographic shifts: Aging population, urbanization, generational preferences
• Technology changes: Mobile adoption, AI integration, remote work infrastructure
• Regulatory changes: New laws creating demand (data privacy, environmental compliance)
• Consumer behavior shifts: Preference for convenience, sustainability, personalization
• Economic factors: Interest rates affecting your market, spending pattern changes

For each trend, explain specifically how it creates opportunity for your business. Do not just list trends -- connect them to your revenue potential.

Target Customer Profile

Define your ideal customer with precision. A consumer business should include:

• Age range, income level, education, location
• Psychographics: values, lifestyle, pain points, buying behavior
• Where they currently spend money on your category
• How they discover and evaluate products like yours

A B2B business should include:

• Company size (revenue and employee count), industry, location
• Decision maker role and title
• Current solution and pain points with it
• Budget range and procurement process

Common Market Analysis Mistakes

• Claiming no competitors exist: Every business has competitors, even if they are indirect. Claiming otherwise tells investors you have not done your research
• Using outdated data: Market data from 2020 or earlier is largely irrelevant post-pandemic. Use the most recent data available
• Relying on a single source: Cross-reference at least 2-3 sources for key data points
• Top-down only: Saying "we just need 1% of a $10 billion market" without showing how you will get that 1% is not convincing. Always include a bottom-up calculation alongside top-down sizing
• Ignoring market risks: Every market has risks -- regulatory, competitive, economic. Acknowledging them builds credibility

The market analysis section takes more research than any other part of your business plan, but it is what convinces readers that your opportunity is real. Using tools like BizPlanForge can help you structure and format your market analysis professionally, but the underlying research and local market knowledge must come from you.