Your market analysis section of your business plan needs to include a description about the landscape industry and its general overall outlook. Your information should be as quantitative as possible and backed up by listing information sources, or how you developed your information.
Your Target Customer
You will want to include basic information about the industry, but more importantly you should focus on the narrow part of the industry your business is focused on. You need to be as specific as possible. Because when you narrowly define your target customer and target geography you will reap many benefits as it relates to your advertising and marketing, your daily business focus and your ability to execute your overall business plan.
Specific items to cover in discussing your target customer should include the following.
- Geographic area of coverage
- Distance from your operations
- Income levels
- Value of homes or properties
- Type of customer (residential, commercial, homeowner associations, etc.)
- Problem or opportunity you may be solving (irrigation audits, new interlocking paths and driveways, smart controller retrofits)
- Demographic information (average age of client, level of education, marital status)
- Any attributes which can help you target on the narrow group of customers you have identified
Size of the market
Determining the size of the market can be a bit tricky, but you need to develop a method by which your market estimate is developed logically and with some thought.
Anyone should be able to easily follow your logic at how you determined your market size estimate.
For both you as the owner of your business and any potential financial backer of your business, what is more important is addressable market size. You will want to clearly know the difference between market size and addressable market and this article by venture capitalist Mark Peter David is a great start.
For example, you decided to narrow your business focus down to replacing driveways with interlocking pavers. You might take the number of single family homes in your target market area to begin to determine the total market. Then you could canvass sections of your target market and develop a rough estimate to estimate how many driveways currently have interlocking pavers.
Simple math develops a market instance based on this estimate.
(Total homes in target market X Percent without interlocking paver driveway) = Total Potential Customers
(Total potential customers X Percent estimate of customers who have the disposable income to spend) = Addressable Market Opportunity
(Average installed price of driveway X Addressable total market opportunity) = Total Market Revenue Potential
(Total market opportunity X Your estimated close rate) =Your acquisition target.
What is important is that you use the main revenue variables in developing your estimate. In this example those variables are average installed price, market opportunity and your acquisition target.
You can see we made an assumption on determining what percentage of customers would have the disposable income to spend on an interlocking paver driveway. As long as the assumption is reasonable to both yourself and your financial backers it will probably make sense.
Rate of growth
On the broadest level the most common indicator used in the landscape industry to determine potential growth rates has been housing starts. Keep in mind that when trying to estimate what your growth rate for the narrow business you have selected, housing starts might not be as good of an indicator.
For example, if your business is strictly residential lawn and landscape maintenance, the rate of growth for your business may be driven more by your ability to add additional clients, or sell more products and services to existing clients. You should be looking at your rate of growth as it relates to not just economic indicators, but more importantly you should be discussing your abilities to capture new marketshare in your addressable market.
In addition, your rate of growth and the overall growth rate of the business may also be seriously impacted by weather events. For example, in some parts of the country where the landscape business is limited to the spring, summer and fall, a very wet spring could severely impact your business. You should note in your business plan that weather patterns can be a risk for your business.