Market research is present in 63 percent of business plans that succeed, according to business planning data compiled by Statista. Yet the market analysis section is the one founders most often write last, rush through, or fill with unverified numbers pulled from industry reports they have not read. This guide explains what a strong market analysis actually contains, how to write each section, and what investors are looking for when they read it.
What Is a Market Analysis in a Business Plan?
A market analysis is the section of a business plan that proves there is a real, accessible, and large enough market for the business to operate in profitably. It combines quantitative data about market size with qualitative evidence about customer behaviour, competitive dynamics, and sector trends.
A market analysis answers three questions that every investor, lender, and strategic partner will ask before committing capital or support: Is there a market? Is it big enough? And can this business capture a meaningful part of it?
It is worth being clear about what a market analysis is not. It is not a collection of large numbers from industry reports pasted together to make the opportunity look impressive. Investors have seen this approach many times and find it unconvincing. A credible market analysis uses data to build a logical argument, not to decorate a slide.
Where it sits in the business plan: the market analysis typically follows the executive summary and company overview, and precedes the operations, marketing, and financial sections. Its position reflects its logical role: before you can explain how you will run the business or what it will earn, you need to establish that the market exists and that there is a credible opportunity within it. For a complete investor-ready business plan across all sections, see Consortia Advisory's business plan service.
What Should a Market Analysis Include?
Six sections: industry overview, target market definition, market size (TAM, SAM, SOM), competitive analysis, customer segmentation, and market trends. Each one builds the logical case that the business opportunity is real.
Industry Overview
The industry overview sets the context. It describes the sector the business operates in, its current state, size, and direction of travel. This section is not about the specific opportunity. It is about demonstrating that you understand the environment you are entering.
Cover the following:
- Current industry size and historical growth rate
- Key trends: technological change, regulation, consumer behaviour shifts
- Major players and the structure of competition (fragmented or consolidated)
- External factors affecting the industry: economic conditions, regulatory environment, supply chain dynamics
Evidence that you understand the sector at a structural level, not just the product level. Investors distrust founders who cannot describe the industry they are entering beyond their own product's features.
Target Market Definition
The target market is the specific group of customers the business intends to serve. This is not the same as the total available market. A business targeting the UK market for premium sustainable pet food is not addressing the entire global pet food market. The target market is the specific, reachable subset of potential customers who are most likely to buy.
Define your target market across three dimensions:
- Demographics: age, income, location, occupation, company size (for B2B)
- Psychographics: values, priorities, buying behaviours, problems they need solved
- Behavioural: how, when, and where they currently purchase similar products or services
A well-defined target market section makes every subsequent section of the business plan more credible. If your marketing strategy, pricing, and distribution channels all align with a clearly defined customer profile, the plan holds together logically.
Specificity. "Small and medium businesses" is not a target market. "UK-based professional services firms with 10 to 50 employees, annual revenue between £500,000 and £5 million, operating in regulated sectors" is a target market.
Market Size: TAM, SAM, and SOM
Market size is the most scrutinised section by investors and the one most often written incorrectly. The standard framework uses three nested figures:
A believable SOM figure, not an impressive TAM. Investors are deeply sceptical of bottom-up projections that show the business capturing 5 percent of a global market. They want to see a credible, sourced path to a realistic share of a defined and accessible market.
The total global or national revenue opportunity if the business had 100 percent market share. The theoretical ceiling. Used to establish the size of the prize and the growth context.
Example: the total UK accountancy software market is £2.4 billion annually.The portion of the TAM that the business can realistically reach given its product, geography, pricing, and go-to-market approach. A meaningful subset of the TAM based on real constraints.
Example: UK accountancy software for sole traders and micro-businesses: £320 million.The realistic share of the SAM the business can capture in the planning period, based on its resources, competitive position, and execution capability. This is the number your financial projections must be consistent with.
Example: targeting 2% of the SAM in year 3: £6.4 million revenue opportunity.Competitive Analysis
The competitive analysis demonstrates that you understand who else is serving the market and where your business fits relative to them. This is not a list of competitor names. It is a structured assessment of how the competitive landscape is shaped and where the opportunity exists.
Cover the following:
- Direct competitors: businesses offering the same or very similar products or services to the same customer segment
- Indirect competitors: businesses solving the same problem with a different approach or product type
- Each competitor's strengths, weaknesses, pricing, market position, and customer reviews
- Your competitive advantage: what your business does that competitors do not, or does better, in a way that is meaningful to the target customer
- Barriers to entry: what makes it difficult for new competitors to replicate your position
A common and effective tool here is the competitive positioning matrix: a two-by-two grid plotting the major competitors on two axes relevant to the sector, such as price versus quality, or specialisation versus breadth, showing clearly where white space exists.
Honesty. Founders who claim to have no competitors immediately lose credibility. Every market has alternatives. If there are no direct competitors, explain why, and consider whether the absence of competition reflects a real opportunity or a market that does not yet exist.
Customer Segmentation
Customer segmentation divides the target market into distinct groups with different needs, behaviours, and value propositions. Not all customers in a target market buy for the same reasons or respond to the same messaging. Segmentation allows the business to prioritise the highest-value customer groups and build a more focused go-to-market strategy.
For each segment, describe:
- Who they are (demographics and firmographics for B2B)
- What problem they are trying to solve
- What they currently use as an alternative
- Why your product or service is better for them than the alternative
- Their estimated size and revenue potential within the SAM
A clear primary segment. Businesses that try to serve everyone equally are not optimised for anyone. Investors want to see which customer segment the business will win first, with the clearest product-market fit, and how expansion to other segments follows from that initial foothold.
Market Trends
The market trends section demonstrates that the business is entering a market at the right time and in the right direction. It connects broader macro and sector-level forces to the specific opportunity the business is pursuing.
Relevant trends to address include:
- Technological change driving new demand or disrupting existing supply
- Regulatory developments opening or closing market segments
- Changing consumer or business behaviour creating unmet demand
- Demographic shifts affecting the size or composition of the target market
- Economic conditions affecting willingness to buy, switching costs, or capital availability
Each trend should be connected to how it specifically benefits the business in question, not presented as background information. The question to answer is: why does this trend make now the right time for this business?
Timing logic. A market analysis that describes a growing market but does not explain why the business is entering it now rather than three years ago or three years from now is incomplete. The trend section should make the timing feel inevitable, not arbitrary.
Consortia Advisory builds professional business plans with fully researched market analysis sections for growth-stage companies across the UK, Cyprus, and Europe.
Where Do You Find Reliable Data for a Market Analysis?
Primary sources you research yourself, and secondary sources published by credible organisations. The weaker the source, the weaker the analysis. Investors notice immediately when market size figures cannot be traced to a credible primary or secondary source.
One source that many founders overlook is their own primary research. Conducting even ten to twenty structured interviews with potential customers in the target segment produces qualitative insight that no industry report can replicate, and that investors find genuinely compelling because it demonstrates real engagement with the market rather than desk research alone.
When citing market size figures, always reference the specific report, publication date, and methodology. An undated or uncited market size figure carries no weight with a sophisticated investor or lender. If you cannot source the number, do not use it.
How Long Should a Market Analysis Be in a Business Plan?
Two to five pages in a written business plan. Shorter if the market is simple and well-understood. Longer only if the market is complex, regulated, or requires significant context to make the opportunity credible. Quality of evidence matters more than length.
The market analysis should be long enough to answer all six of the core questions (industry, target market, size, competition, segments, trends) with credible evidence, and no longer. Padding with long excerpts from industry reports, generic sector descriptions, or statistics that do not connect to the specific opportunity is a common weakness that makes the section feel cut and pasted rather than genuinely researched.
Two to four pages covering all six sections with sourced data, clear headings, and a logical flow from market context to specific opportunity. The competitive analysis may use a table or matrix. The market size section should show TAM, SAM, and SOM with a clear explanation of how each figure was derived.
The market analysis typically compresses to two to three slides: one on market size and opportunity, one on competitive landscape, and one on target customer. The same rigour applies to the data. Do not present numbers in a pitch deck that cannot be supported by the underlying analysis in a full business plan.
What Are the Most Common Market Analysis Mistakes?
Top-down market sizing with no bottom-up validation, claiming no competitors exist, using undated or uncited data, and failing to connect market trends to the specific opportunity the business is pursuing.
Claiming the TAM as the addressable opportunity. A UK fintech startup does not address the $300 billion global payments market. It addresses a specific, defined subset. Investors will challenge this immediately.
Every market has alternatives. Saying there are no competitors either means the market does not exist yet, or means the founder has not looked properly. Neither inspires confidence.
Market size figures without a source date and publication cannot be verified or challenged. Investors read this as either laziness or an attempt to obscure a smaller or declining market.
A market analysis that describes a large, growing market but does not explain precisely how and why this specific business will capture a share of it has not answered the investor's question.
"Millennials who care about sustainability" is not a customer segment. A credible segment has a defined size, a specific problem, and a clear reason to prefer your solution over the available alternatives.
If the market analysis shows a SAM of £10 million and the financial projections show £8 million in year three revenue, the numbers do not hold together. The market analysis and financial model must be consistent.
How Does the Market Analysis Connect to the Rest of the Business Plan?
Every other section of the business plan should be directly traceable back to conclusions in the market analysis. It is the foundation the entire plan rests on.
The market analysis does not stand alone. It is the evidential foundation from which the rest of the plan is built. The marketing strategy should be built around the target customer defined in the market analysis. The pricing strategy should reflect the competitive landscape identified in the competitive analysis. The financial projections should be consistent with the SOM figure derived from the market size section.
When these connections are explicit in the plan, investors can see that the business has been thought through rigorously and that the projections are grounded in something real. When they are absent, investors are left wondering whether the team understands their own market well enough to execute in it.
According to Forbes data cited by business planning research, 75 percent of investors consider financial projections their most important criteria in a business plan. But financial projections that are not grounded in a credible market analysis are numbers without a foundation. The market analysis is what makes the revenue assumptions in the financial model defensible. A business plan without a rigorous market analysis is asking an investor to trust projections that have no evidential basis.
For businesses preparing a plan for investor fundraising, lender applications, or strategic planning, the market analysis is one of the areas where professional support adds the most value. A financial advisory engagement can help build the financial model that sits alongside a well-researched market analysis. For businesses that need to validate the market opportunity before committing to a full plan, a feasibility study is the appropriate starting point. If your business also has significant intangible assets, understanding their value before presenting to investors is relevant: see intellectual property valuation: why it is now essential.
You can review how Consortia Advisory has structured business plans and market analyses across sectors in the case studies. For a fuller understanding of how business valuation connects to the financial sections of a business plan, see how to value a business: 8 methods explained and the EBITDA multiples by industry guide for 2026.
Consortia Advisory builds investor-ready business plans with fully researched, sourced market analysis sections for companies across the UK, Cyprus, and Europe.
See Business PlansNot sure the market opportunity is large enough or well-defined enough to support a full business plan? A feasibility study answers that question before you commit to a plan.
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FAQs About Market Analysis
What is a market analysis in a business plan?
A market analysis is the section of a business plan that proves there is a real, accessible, and large enough market for the business to operate in profitably. It combines quantitative data on market size, competitive landscape, and industry trends with qualitative evidence about customer behaviour and demand. It is the evidential foundation from which the marketing strategy, pricing, and financial projections are built.
What should a market analysis include?
A complete market analysis should cover six areas: an industry overview establishing the sector context, a defined target market, a market size breakdown using TAM, SAM, and SOM, a competitive analysis identifying direct and indirect competitors, a customer segmentation showing distinct buyer groups, and a market trends section connecting broader forces to the specific opportunity. Each section should be supported by sourced, verifiable data.
How long should a market analysis be in a business plan?
For a standard written business plan, two to four pages covering all six sections is the appropriate length. For an investor pitch deck, the same content compresses to two to three slides. Length is less important than the quality of evidence. A two-page market analysis with sourced, specific data is more credible than six pages of generic industry description.
What is the difference between TAM, SAM, and SOM?
TAM is the Total Addressable Market: the theoretical maximum revenue opportunity if the business had complete market share. SAM is the Serviceable Addressable Market: the realistic portion of the TAM the business can reach given its product, geography, and go-to-market approach. SOM is the Serviceable Obtainable Market: the specific share of the SAM the business can realistically capture in the planning period. Your financial projections must be consistent with your SOM, not your TAM.
Where do you find reliable data for a market analysis?
Reliable sources include the Office for National Statistics for UK industry and economic data, Companies House for competitor financial filings, IBISWorld and Mintel for paid industry reports, Statista for market size and consumer statistics, trade association publications for sector benchmarks, and PitchBook or Crunchbase for funding and valuation data. Primary research through structured customer interviews is also highly valuable and often more persuasive to investors than secondary data alone.
What are the most common mistakes in a market analysis?
The six most common mistakes are: using the TAM as the addressable market rather than the SAM or SOM; claiming no competitors exist; citing undated or uncited market size figures; writing a target market profile that is too generic to be useful; describing a growing market without explaining how the specific business will capture a share of it; and presenting financial projections that are inconsistent with the market size data in the same plan.