A well-prepared feasibility study does not convince a financing institution based solely on the project’s attractiveness. A lender or investor primarily analyzes whether the assumptions regarding demand, sales, prices, and competitive position are sufficiently supported by data. The market analysis should therefore address not only whether there is a need for the investment, but also whether the project will be able to generate predictable revenue under conditions of real competition.

In practice, the greatest risk arises when a financial forecast is based on unsubstantiated claims, data that is not relevant to the project’s location, or overly optimistic operational assumptions. Banks and other lenders expect a coherent case in which the market analysis, financial model, and investment implementation plan reinforce one another. Only then can the market portion of the feasibility study effectively mitigate perceived credit risk.

Why does the financing institution analyze the market component in such detail?

For the bank, the market is not merely a backdrop for the project. It is a source of information about the project’s ability to service its debt and maintain liquidity. If revenues depend on the sale of services, the leasing of space, the utilization of production capacity, or the acquisition of users, the lender will assess whether the declared sales level is realistically justified.

Market analysis helps identify risks that the financial model itself does not explicitly show. These include, among other things, the entry of new competitors, falling prices, difficulties in acquiring customers, regulatory changes, and limited customer availability in a specific area. The more a project depends on future demand, the more important the quality of the market justification becomes.

The expected document should demonstrate that the authors of the study understand the mechanisms that influence the investment’s outcome. It is not enough to simply state that the sector is growing or that customer needs are evident. It is necessary to show why a given phenomenon will specifically translate into sales for the project under analysis.

What answers is the bank looking for in its market analysis?

A financing institution typically wants clear answers to fundamental business questions. These answers should be based on a well-structured analysis, not on the investor’s statements. It is crucial to demonstrate the relationship between market potential and the project’s projected revenues.

• who will be the purchaser of the product or service;
• What customer problem does the planned investment solve?;
• in which area sales will take place;
• what alternatives customers have and why they might choose the new offer;
• which justifies the adopted price level and the rate at which customers are being acquired;
• How will the project's situation change if demand or prices turn out to be lower than expected?

The conclusions must have a direct impact on the financial model. If the analysis indicates strong competitive pressure, the forecast should not assume that high prices will be maintained without providing specific justification. If demand is seasonal, the cash flow model should account for the seasonality of cash inflows and the associated capital requirements.

Does the market description have to be tailored to a specific project?

Yes. A general overview of the sector can serve as a starting point, but it cannot replace an analysis of the conditions under which the investment will operate. A service project operating locally requires a different set of data than a venture targeting domestic customers, exporters, or a specific group of B2B business partners.

The feasibility study should precisely define the relevant market for the project. It should take into account the sales geography, customer segment, type of offering, distribution channels, and actual barriers to switching suppliers. Broad industry data can be helpful, but it should not automatically serve as the basis for revenue forecasts.

What should confirm the existence of demand?

The financier expects evidence that allows them to assess whether the demand is genuine, available to the project, and sufficiently sustainable. The most valuable information is that which can be verified and data directly related to the planned offering. Depending on the industry, this may include customer survey results, order history, letters of intent, preliminary agreements, requests for proposals, data on the utilization of existing resources, or confirmed interest from tenants.

It is important to distinguish between general interest and a willingness to purchase. A customer’s statement that a given product seems attractive carries a different weight than confirmation of commercial terms, an acceptable price, the planned volume, or the start date of the partnership. The study should clearly indicate the nature of the evidence used.

In Polish analyses, research conducted by organizations such as the Hume’s Institute research agency can be helpful. However, relying on external sources does not eliminate the need to verify whether their scope corresponds to the location, segment, and specific characteristics of a given project’s audience.

How should customer segments be presented?

Segmentation should be used to assess the quality of revenue. From a financier’s perspective, it is important whether sales will be based on a large number of customers or on a small group of major clients. Revenue concentration does not necessarily rule out a project, but it requires the presentation of mechanisms to mitigate the risk of losing a key contract.

For each key segment, it is worth describing purchasing needs, supplier selection criteria, price sensitivity, the length of the decision-making process, and the predictability of demand. This approach makes it possible to later defend sales assumptions before a credit analyst or an investment committee.

How can you analyze the competition in a way that ensures the analysis is reliable?

A competitive analysis should not be limited to a list of companies operating in the industry. The bank will want to know which competitors serve the same customers, what products and services they offer, where they operate, what advantages they have, and whether their presence limits the project’s ability to achieve its projected sales.

It is particularly important to take indirect competition into account. A customer may decide not to make a purchase not only in favor of another company offering a similar product, but also by choosing an alternative solution, staying with the current supplier, or postponing the investment decision. Omitting such alternatives often leads to overestimating demand forecasts.

The conclusions should be specific: which elements of the offering help attract customers, what barriers to entry exist in the market, and where the project is most vulnerable to price pressure. Competitive advantages must be documented, for example, through location, technology, access to distribution channels, team expertise, contracts, or a distinctly different value proposition for the customer.

How can you link market analysis to revenue forecasting?

This is one of the most important elements of a feasibility study. Every assumption affecting revenue should be based on market or operational factors. This applies to prices, sales growth rates, utilization of operational capacity, customer structure, contract lengths, and projected customer retention.

A good approach is to prepare an assumptions map. It should show where a given value in the financial model comes from, what evidence supports it, and who is responsible for updating it. Such documentation facilitates verification by the bank, but it also allows the investor to better manage the project once financing has been secured.

• Pricing assumptions should be based on an analysis of market prices and the value offered to the customer;
• Volume projections should take into account sales capacity, customer availability, and operational constraints;
• The revenue schedule should correspond to the actual sales cycle;
• Contract revenue should be separated from projected revenue;
• Customer acquisition costs should be consistent with the selected sales channels.

Why are scenarios important to a financier?

The financing institution does not expect only the base-case scenario. It also needs answers as to what will happen if the market grows more slowly, competitors lower prices, or the project’s launch is delayed. Scenarios are not a sign of a lack of confidence in the investment. They show that risks have been identified and can be managed.

A conservative scenario should be based on reasonable changes to key market parameters, rather than on an arbitrary reduction of all model inputs. It is worth identifying corrective measures, such as phasing investments, expanding the customer base, changing pricing policy, reducing fixed costs, or obtaining additional contractual safeguards.

What data sources enhance the credibility of a feasibility study?

Sources should be up-to-date, identifiable, and relevant to the market under study. Primary data, industry information, public documents, administrative data, registries, materials from industry organizations, and confirmations from potential customers are highly valued. Each source should be described, including its scope, date, and limitations on interpretation.

For projects with significant exposure to economic changes, external market forecasts are useful, as they allow assumptions to be placed within the broader context of the sector. However, it is important to remember that an industry forecast is not automatically a forecast of a single project’s results. It remains necessary to translate these trends into a specific offering, area of operation, and customer group.

PMR Market Experts publishes industry reports that can serve as a valuable source of information for assessing trends in the sector, the dynamics of competition, and factors influencing demand.

How can you avoid mistakes that lower your project’s grade?

The most common problem is a lack of consistency between the various sections of the business plan. The market description may indicate intense competition, while the financial model assumes rapid customer acquisition at a high price and low sales costs. Such a discrepancy will be noted during the credit analysis.

The selective use of data also poses a risk. Information that is less favorable to the project—such as a decline in customer activity, the emergence of a new competitor, or regulatory barriers—should not be overlooked. It is far more credible to identify risks and present a plan to mitigate them.

If an investment requires an in-depth market assessment, support can be provided in the form of consulting services focused on developing a market case, testing assumptions, and tailoring the materials to the requirements of the financing process.

In a nutshell: How do you prepare a market analysis for a bank?

A thorough market analysis in a feasibility study should be specific, based on verifiable premises, and directly linked to the financial forecast. Its purpose is to demonstrate that the projected revenues are not merely the investor’s ambition, but result from identified demand, a defensible competitive position, and a realistic sales plan.

Before submitting the document to the bank, it is a good idea to verify that each significant revenue item is justified, that the data sources are described, and that the conservative scenario demonstrates the project’s ability to operate under less favorable conditions. Material prepared in this way increases the transparency of the process and facilitates a substantive discussion about risk.

If the market analysis is intended to support the securing of financing and requires an independent verification of its assumptions, it is advisable to contact PMR Market Experts to prepare a report tailored to the specific nature of the project and the expectations of the financing institution.