The opportunity-analysis and research section basically provides the credible data and information to determine and demonstrate the market viability of your proposed business on paper, and perhaps in the field, before you start. It should be a clear description of why the business presents an excellent opportunity, based on sound research and logic. Entrepreneurs often either put little time and attention into this section or ignore data that contradict their optimistic view of the opportunity. This can prove to be a fatal flaw in business planning. A well-researched opportunity analysis can help to move your business to the head of the line for financing.
The industry analysis will provide the broad context for your business plan. It will deal with such factors as industry definition, industry size and growth (or decline), product and industry life cycle, and any current or anticipated legal or regulatory concerns. Determining industry structure, including geographic distribution, business size of member firms, concentration of power, and rates of failure, is also important. For example, the failure rate of restaurants is notoriously high and should be addressed in a business plan for a dining establishment. This is also the place to discuss how you will track industry developments on an ongoing basis.
The environmental analysis addresses the roles of the community, region, nation, and/or the rest of the world as they relate to your business. Whether or not demographic and family changes are working in your favor could mean adjustments for the business. Changes in technologies and economic conditions might radically alter your plans. Examples could include the aging of the baby boomer generation or the prevalence of computer technology.
The opportunity analysis should include a proof of market investigation that will provide evidence of a market opportunity for your organization. This should identify market size, both in terms of dollars and units. There have to be enough customers who will purchase your product or service in sufficient quantity at a high enough price and often enough for your business to be sustainable.
Next, this analysis should describe your target market segments, which are groups of people defined by common factors, such as demographics, psychographics, age, or geography. For example, your target market segment for a gospel club may be African-American Christians between 18 and 25 years of age living in the Detroit metropolitan area. Discuss the size of your target market and the market share that would be attainable.
A competitive analysis is the next important component of the opportunity analysis. This should compare your organization with several direct and indirect competitors by name and include comparisons that would be meaningful to customers. The format of a competitive analysis can vary significantly, but it must make clear where your competitive strengths and weaknesses are and where there are holes in the competitors’ businesses. Factors to compare may include, but would not be limited to, location, product selection, market share, product or service quality, experience, advertising, pricing, finances, capacity, hours, size and skill of workforce, and reputation.