Common market analysis deficiencies in business plans from South African entrepreneurs

It is common reality that bankers and financiers in South Africa require businesses, new and existing to submit a business plan to justify the need for both start-up and continuity funding. Whilst large existent businesses  often have personnel that can professionally compile a business proposal, small and medium scale start-ups do not always have this advantage. Regardless, organisations can still compile a business plan as well as accompanying financial projections through research and self-education. This is an encouraged approach as a business develops new invaluable expertise in the process.

Within a business plan, market analysis is one of the most important sections of the proposal document. Common market analysis shortfalls that have been identified on the South African business funding markets are discussed below to help businesses improve their planning capacity. One sad observation is that even some of these shortfalls escape the attention of some of the business plan consultants on the market.

Narrow market research

Market research is a challenge for most small businesses and poorly experienced business plan consultants. It is therefore not surprising when business plan presentations do not show market research evidence. Without market research information, it is difficult for financiers to marry your business concepts to any particular market. Businesses exists to serve markets and as such any need to start or expand businesses must have something to do with a particular market.

What should be in a market analysis section

The market being targeted by a business should be explicitly identified in terms of the following:

  • Who are the customers/clients
    • Is it businesses?
    • Is it households and individuals
  • Where this market is located
  • The demographics of the market
    • Population size
    • Household size
    • Age
    • Gender
    • Ethnicity
  • The size of the market in term
  • Market income estimations

Where to get the info

This information can be obtained through secondary research over the internet and does not always require businesses to go into the field to conduct a survey.  Businesses with adequate financial resources are encouraged to purchase market research data relating to their products and geography from market research bureaus.

 

The result

The result of providing the information mentioned above helps the prospective financier relate your business funding application to an existing market with a potential demand. Never leave it to your investor to look for market data when assessing your business plan. Provide this data in adequate proportions and formats that include charts, tables and graphs.

To conclude remember that most South African financiers such as SEDA,NYDA,Land Bank,IDC and commercial banks all have market information formats. Kindly consult these formats to guide you in your endeavours. If you believe time and resources are not on your side, it might be best to engage a business plan consultant to assist.