How can you incorporate market research into financial analysis as an IB analyst?

1 Identify the key market drivers

The first step to incorporate market research into financial analysis is to identify the key market drivers that affect the revenue, costs, and profitability of your target company or project. Market drivers are the external factors that influence the demand and supply of a product or service, such as customer preferences, demographics, technology, regulation, competition, and macroeconomic conditions. You need to understand how these drivers impact the market size, growth rate, segmentation, and pricing of your target market, and how they are expected to change in the future. You can use various sources of market research, such as industry reports, trade publications, surveys, interviews, and online databases, to collect and analyze data on the key market drivers.

2 Adjust the financial projections

The next step to incorporate market research into financial analysis is to adjust the financial projections of your target company or project based on the data and insights from the market research. Financial projections are the forecasts of the income statement, balance sheet, and cash flow statement of your target company or project for a certain period of time, usually five years. You need to use the market research data to estimate the revenue, costs, and profitability of your target company or project under different scenarios and assumptions. For example, you can use the market size and growth rate to project the sales volume and revenue, the market segmentation and pricing to project the gross margin and operating expenses, and the market trends and opportunities to project the capital expenditures and working capital.

3 Evaluate the risks and opportunities

The final step to incorporate market research into financial analysis is to evaluate the risks and opportunities of your target company or project based on the market research data and financial projections. Risks are the potential threats or uncertainties that could negatively affect the performance, valuation, and prospects of your target company or project, such as market saturation, regulatory changes, competitive pressure, or technological disruption. Opportunities are the potential benefits or advantages that could positively affect the performance, valuation, and prospects of your target company or project, such as market expansion, product innovation, customer loyalty, or strategic partnerships. You need to use the market research data and financial projections to identify, quantify, and prioritize the risks and opportunities of your target company or project, and to suggest possible strategies or actions to mitigate the risks and exploit the opportunities.

4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?