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How to Write The Industry Section of a Business Plan

Writing a Business Plan: Section 2

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Geber86 / Getty Images

When writing a business plan, the Industry section is best organized as two parts: an overview of the industry and a summary of your business's position within the overall industry.

Before writing this section of the business plan, use these questions to focus your research:

• What is the size of your industry?
• What sectors does this industry include?
• Who are the major players in this industry?
• What are the markets and customers for this industry?
• What are the industry's estimated sales this year? Last year? The year before?
• What national and economic trends have affected this industry and how?
• What national and economic trends might affect it in the future and how?
• What is the long-term outlook for this industry?
• What products or services will your business be selling?
• What is your Unique Selling Proposition? (What is it about your business that makes it unique and sets it apart from competitors?)
• What are the barriers to entry in your industry?
• How will you overcome these barriers?
• Who are your competitors?
• What is the market share of your competitors?
• What is your business's competitive advantage (i.e., your market niche or estimated market share)?
• What is your target market?
• How are you protecting your product or process (i.e., patents, copyrights, trademarks, franchise rights that you either hold or plan to acquire)?

Once you have all this information, you'll write this section of the business plan in the form of several short paragraphs. (Remember, each of these paragraphs is a summary, not a detailed point-by-point explanation.) Use appropriate headings for each paragraph. 

Finding Information on Your Industry

But where do you find the information that you need for writing the Industry Overview section of your business plan?

United States Research

In the United States, you may want to start your research by reviewing information from the U.S. Census Bureau, Industry Statistics Portal. This site provides data for selected industries separated into categories using the North American Industry Classification System (NAICS). The Bureau of Labor Statistics also offers a large selection of information grouped by NAICS industry.

There are also other sources of information—some free and some paid sources—including IBIS World, Select USA, and the U.S. the Department of Commerce Bureau of Economic Analysis.

Canadian Research

When you're writing a business plan and looking for information on Canadian industries, Industry Canada is your logical first stop. Their Find Statistics by Industry  page lets you see key economic indicators for different sectors of the Canadian economy, access industry profiles, and analysis and research small businesses in Canada generally.

Another primary source for industry and economic information that you can easily access online when you're writing a business plan is Statistics Canada. From this homepage you can find a wealth of free statistical information; use this page, to search for Statistics Canada publications back to 1980.

There are also provincial statistics websites where you'll be able to find more economic, social, and demographic statistics relating to your industry and the business environment.

The Canada Business Service Centres located in each province also offer excellent collections of resources online, and telephone and email information services. You'll find a list of links to the Canada Business Service Centre in each province in my Provincial Programs and Services Resources.

The business sections of national newspapers and business magazines will also be helpful; these often carry features on the past and future business trends.

And don't forget your local sources of business information when you're researching your business plans, such as your Economic Development Centre, Chamber of Commerce, or Women's Enterprise Centre, or the business section of the local library.

Doing Business Plan Research

If your business is related to manufacturing when you're writing a business plan begin by determining the NAICS of your particular industry, and the sector and sub-sector if applicable. It will make it easier for you to find statistical information relating to your industry. If your business is a service, begin with Industry Canada's service industry profiles.

Refer to the list of questions earlier in this article on how to write a business plan as a research guide. Whenever you find a piece of information that you want:

• Check its date and determine whether or not the information is current enough to be valid;
• Write down the date and source of the information, as you'll need to cite your information sources in the business plan.

When you're writing a business plan, you want your research information to be as up-to-date as possible. After all, there's no point in starting a business if you don't want it to succeed.

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How to Write an Industry Analysis in Your Business Plan?

The Market Analysis Kit

• September 12, 2024
• 12 Min Read

You can’t always make the best decisions for your business without understanding how your industry works. You can’t simply enter a shooting competition without understanding how a gun works, right?

That’s why industrial analysis is a really important part of your business plan.

When you nail industrial analysis, you tell investors you’ve done your homework, know your stuff, and are here to last. You also get the opportunity to substantiate any claims of new innovation.

In this article, we will explore what industry analysis is, why it’s important, and how to write it in your business plan.

Let’s begin.

What is industry analysis in a business plan?

Industry analysis is a market assessment methodology that helps businesses and entrepreneurs understand how their company fares against competitors and works within the larger industry it’s a part of.

You can use it to extract essential industry insights like:

• Supply and demand metrics in your industry
• Understand your competitive landscape better
• See industries that are overlapping or affecting your industry
• New opportunities for Innovation and exploration

Why is industry analysis important for a business plan?

Industry analysis is an important part of a business plan since it gives you a clear vision regarding multiple aspects of the field your company is or wants to occupy.

It will help you get insights like:

• The current size and growth rate of your industry
• Key trends and drivers shaping the industry
• The main players, and their strengths and weaknesses
• The market share distribution among key players
• The customer segments within the industry, and their needs and preferences
• The major challenges and barriers to entering the industry
• The regulatory and legal considerations affecting the industry
• How technology impacts your industry, and emerging innovations
• The typical financial metrics and performance benchmarks for the industry
• The potential risks and uncertainties within the industry, and how they should be mitigated

Comprehensive industry analysis helps you internally strategize your next moves in the business and builds accurate expectations for potential investors.

5 Steps to conduct your own industry analysis

Use the following steps to conduct a thorough industry analysis:

1. Conduct industry background research

Start with researching the background of your industry or a specific subsection of it. Decide what key questions you want your analysis to answer, like competitor behavior, market growth, or industry standards.

Go beyond a simple Google search to look for industry associations by making an additional effort of referencing to things like:

• Reports from firms like Gartner, Forrester, and McKinsey that provide in-depth analyses and forecasts
• Nielsen, Statista, and IBISWorld that offer comprehensive market data and industry statistics
• Data from government sources such as the U.S. Census Bureau, Bureau of Economic Analysis (BEA), and Eurostat
• Data from trade associations like the National Retail Federation (NRF) or American Marketing Association (AMA)
• Business news outlet data from Financial Times, Bloomberg, and The Wall Street Journal for current trends

Make a list of your competitors and explore ways to gather research on them.

2. Collect data

Gather relevant industry data to answer key questions about your target market and competitors. Dive into the latest industry analysis reports, both from your company and others, to spot the latest trends in your business environment.

You should also review competitor ads, promotions, product placements, and financial data to learn about their profits and target consumers. Don’t forget to tap into secondary sources like government stats, marketing reports, and journal articles for additional insights.

Here are some data points to focus on:

• Industry participants: Look at the other players in the industry, both small and big, and see what they’re doing, how they’re innovating or gaining investments.
• Distribution patterns: To effectively manage distribution in your industry, assess whether you need to utilize regional distributors, direct sales, or intermediaries, and adapt your strategy to leverage current technologies and distribution models to optimize reach and efficiency.
• Competition and buying patterns: An industry analysis isn’t complete without a clear mention of how customers decide between competitors when making a purchase decision. What are the factors they look at? What makes certain competitors more successful than others? What’s the sweet pricing spot?

3. Analyze the collected data

Next, use an industry analysis model to examine the data you’ve collected on your particular industry. You can choose from one of the following:

Porter’s 5 Forces or Competitive Forces Model

Porter’s model proposes that if you analyze these five forces, you can get an accurate impression of your industry, making further analysis easier:

1. Intensity of industry rivalry

The number of players in an industry and their market shares reflect its competitiveness. For instance, in the smartphone industry, the lack of product differentiation intensifies competition among brands.

2. Threat of potential entrants

This highlights how easily new firms can enter a market. For instance, entry into the electric vehicle industry is difficult due to factors like high R&D costs and regulatory hurdles. Thus, established companies can enjoy prolonged benefits, facing a consistent set of rivals.

3. Bargaining power of suppliers

When the bargaining power of suppliers is high, your suppliers could set higher prices or reduce the quality of what you buy.

For example, if a semiconductor manufacturing company relies on a limited number of chip suppliers, those suppliers hold significant leverage. This can heavily impact smaller tech companies, as it directly affects both the cost and quality of their products.

4. Bargaining power of buyers

The reverse occurs when customers hold the bargaining power. In the retail industry, if a supermarket chain represents a significant portion of sales for multiple suppliers, it can negotiate lower prices, demand higher quality, or secure additional services and discounts.

5. Threat of substitute goods/services

Industries constantly face competition from others producing substitute products. For example, in the beverage industry, soda companies compete with bottled water and energy drink producers. This rivalry limits their ability to charge high prices.

SWOT Analysis

SWOT stands for S trengths, W eaknesses, O pportunities, and T hreats. These parameters are a great way of getting a quick idea about various facets of the industry. You can use this image for reference:

Broad Factor Analysis or PESTEL Analysis

PESTEL stands for political, economic, social, technological, environmental, and legal factors. It’s beneficial when you’re analyzing such external elements that might affect your business.

4. Pen down your analysis

Once you’re done with collecting and analyzing your data, it’s time to pen it down as an industry analysis document.

Remember to highlight the following sections in your draft:

• Introduction: Give an overview of your industry, competitors, and key industry trends.
• Aim: Clearly state the purpose of your analysis and outline the key questions.
• Data: Present the data you gathered with supporting charts and graphs.
• Analysis: Discuss your findings and answer the questions from the aim.
• Future: Highlight the short- and long-term impacts on the company and any potential challenges.
• Summary: Wrap it up with a brief 3-4 line summary

Tip: You should also use the pointers in this article’s next section to present an ideal industrial analysis document. Don’t forget to proofread and edit once you are done.

5. Evaluate your business position

Once you have the document in front of you, thoroughly evaluate your business. Use the analysis section you created to guide the company’s direction in your focus area.

Let’s say you make soft drinks, and you see a notable shift in consumer’s drinking patterns through industry analysis. You see a lot of your competitors are now launching low-sugar alternatives for their global markets, and the consumer demand for healthier beverages is increasing continuously.

You must actively join the bandwagon and present and document all your efforts to launch healthy beverages from your own brand.

If your findings raise more questions, consider running a follow-up analysis to dig deeper into other industry factors.

How to write the industry analysis section of your plan

Here’s a step-by-step approach to writing a meaningful and actionable industry analysis section for your business plan:

Brief overview

This part highlights the key findings of the analysis and quick recommendations. Herein, you can mention the level of your research, whether it’s on a local, regional, provincial, national, and/or global level. You can also briefly highlight the core points that you will be expanding upon in the upcoming sections.

Industry overview

In the industry overview section, include a short description of your industry with the prime products/services and markets. Make sure you document recent developments, news, and innovations.

For instance, if you’re working in the electric vehicle (EV) industry, this section should answer questions like:

• What are the latest technological advancements in battery efficiency?
• How are government policies influencing the adoption of electric vehicles?
• Who are the leading manufacturers, and what market share do they hold?
• What are the current challenges and opportunities in the EV market?

Government regulations

Be sure to mention any recent laws that impact your industry and the licenses or permits you’ll need to operate in your target market. Don’t forget to cover any associated fees or costs that might come into play

Competitor landscape

This section needs to have an analysis of the major players, market dynamics (share and positioning), competitor strategies, future competition, as well as competitive forces and their unique selling proposition.

Your unique position

Describe what sets you apart in the competitive landscape. For instance, if you’re entering the plant-based food industry, you might highlight how your product’s unique blend of ingredients offers superior taste and nutritional value compared to existing options.

Remember to mention the following:

• Industry forecast: Gather economic data and industry forecasts for various time frames, such as 5, 10, and 20 years, and be sure to cite your sources. Also, clarify whether the industry is new and emerging, growing, maturing, or declining.
• Potential risks and limitations: Discuss the factors that could negatively affect your business, along with your short-term and long-term outlook

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Tips to write your industry analysis

Two Simple tips you don’t want to miss:

1. Never make it too long

The structure of the industry analysis section of your business plan depends a lot on your intended audiences and the overall plan’s depth. That being said, an ideal industry analysis section usually occupies around 1-2 pages of a 40-50 page business plan.

Any longer would make it hard for a reader to skim through.

2. Use visuals

Include visual aids like charts, graphs, and tables. They help convey relevant information in a streamlined manner. An ideal analysis should have a mix of text and visuals, with visuals accounting for 20-30% of the content.

Business plan industry analysis example

You can’t simply haphazardly present an industry analysis by lugging together all the collected info on a few pages. You need a well-defined structure. So, here’s an example of a simplified industry analysis draft for you to extract inspiration from.

Business Name: Urban Fusion Bistro Location: Brooklyn, New York Type of Business: Boutique Coffee Roastery

Urban Fusion Bistro is a boutique coffee roastery in Brooklyn, New York, aiming to offer a premium coffee experience with artisanal roasting and a modern atmosphere. Our goal is to serve coffee enthusiasts and casual drinkers with high-quality, single-origin coffees and unique blends.

Government Regulations

Operating requires compliance with local health, safety, and business regulations. Key permits include a business license, food service permit, and possibly a retail food permit, with initial costs of around $25,000.

Competitor Landscape

Brooklyn’s coffee market includes chains and independent cafes. While competition exists, the boutique coffee segment is less saturated. Urban Fusion Bistro’s focus on artisanal roasting and premium products offers a competitive edge.

Unique Position

Urban Fusion Bistro will stand out with its artisanal roasting, curated coffee selection, and modern, inviting ambiance. This approach targets both coffee connoisseurs and casual drinkers seeking a unique experience.

Industry Forecast

The coffee industry in Brooklyn is set to grow steadily, with specialty coffee projected to increase by 7% annually over the next decade. Urban Fusion Bistro is positioned to meet the rising demand for high-quality, artisanal coffee.

Potential Risks and Limitations

Risks include economic downturns, increased competition, and fluctuations in coffee prices. Regulatory changes and evolving consumer preferences may also impact operations. Strategic planning and high-quality standards will be crucial for long-term success.

Financial Position

Urban Fusion Bistro expects first-year revenues of $800,000 with a 20% profit margin. Below are the financial projections:

Urban Fusion Bistro is set to thrive in Brooklyn’s growing coffee market with its focus on artisanal roasting and a unique café experience. Our solid financial plan and understanding of market trends position us for success, promising a distinctive coffee experience for Brooklyn’s coffee lovers.

The bottom line

And with that, you’re all set to write your impressive industry analysis section of your comprehensive business plan.

If you’re still a bit hesitant to do all of this on your own or don’t really know where to start, you can always put your trust into a good business plan software like Upmetrics .

Its AI-powered business plan generator will provide you with both step-by-step guidance and AI assistance so you can generate a perfect business plan with the perfect industry analysis section to help you grab the pulse of your industry.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

How can i gather data for an industry analysis.

Collect data from industry reports, competitor advertisements, financial data, government statistics, trade associations, and marketing reports. These sources provide a comprehensive view of market trends, competitor strategies, and industry performance.

What is the function of industry analysis in a business plan?

Industry analysis helps you create resilient strategies and showcase the overall opportunities and risks involved in your field by using a nutshelled presentation of the market environment, opportunities, and threats.

What tools can help in conducting an industry analysis?

Models like Porter’s 5 Forces, SWOT analysis, and PESTEL analysis are effective tools for conducting an industry analysis for your own business. If writing plans yourself is challenging, digital tools are available to help automate the process and ensure accuracy.

How do I present industry analysis in my business plan?

Take up 1-2 pages of your business plan to provide a brief overview of core industrial facets like opportunities, risks, competitors, and ROI expectations. Use visuals like charts and graphs to make the information easily digestible and engaging.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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How to Write an Industry Analysis Section in Business Plan

Written by Vinay Kevadiya

Published Oct. 4 2024 · 8 Min Read

Industry analysis in a business plan isn’t just an option; it’s a key driver that steers your business toward success.

To include industry analysis in your business plan requires proper understanding which helps you transform an opportunity into a strategic advantage.

Hence in this blog, you’ll discover everything you need to know about industry analysis in a business plan and how to apply it to drive your business toward success.

Let’s dive in.

What is industry analysis in a business plan?

Industry analysis is a broader examination and evaluation of the market environment in which a business operates. It involves:

• Identifying key players
• analyzing external factors
• Researching marketing trends
• Understanding the competitive landscape

Industry analysis in business planning aims to use potential data and transform it into impactful insights that guide decision-making.

This process ensures that business decisions are not based on guesswork but on solid, data-driven evidence. The valuable insights through industry analysis helps businesses in:

• Identifying gaps
• Providing organic growth
• Highlighting potential risk
• Recognizing market opportunities

Importance of industry analysis in a business plan

Industry analysis provides essential insights that shape a company’s strategic direction. Additionally, it offers numerous other reasons that highlight its importance in a business plan, including the following:

Provides market understanding

Industry analysis provides a comprehensive understanding of the market landscape, including target market, size, growth rate, and current market trends.

Having in-depth market knowledge allows your business to tailor offerings and take advantage of opportunities that can give your business a competitive edge.

Evaluates competitive landscape

Your business must understand competitors' strengths, weaknesses, and market share to stay ahead. A competitive analysis helps position your business more effectively by providing these insights.

By evaluating the competitive landscape, your business will benefit from the following:

• Potential threats
• Strategic advantages
• Market opportunities
• Competitive positions

Offers customer insights

Understanding customer segments and preferences is crucial for tailoring products or services to meet market demands.

Industry analysis provides insights into customer behavior, which enables your business to align its offerings with consumer needs.

Moreover, with insights into customers, it provides market analysis that makes decision-making and keeps your business ahead of your competitors.

Further, if you want to delve deeper into market analysis in a business plan, check out our blog on writing market analysis for a business plan .

Identifies opportunities and risks

Industry analysis highlights potential threats, such as new competitors, changes in consumer behavior, or economic downturns. Moreover, it uncovers potential opportunities for innovation and growth.

With these valuable insights, your business gets the following advantages:

• Complete industry overview
• Proactive and ready to mitigate risk
• Quick capitalization on emerging trends
• Relevant information on customer needs and preferences

Delivers regulatory awareness

Every industry has its own business environment and regulatory landscape. Understanding this environment and regulations is crucial for compliance and can help avoid legal pitfalls.

Industry analysis informs your business about relevant laws, standards, and compliance requirements.

This awareness enables you to adapt your strategies accordingly, which ensures smooth operations and minimizes the risk of penalties.

Attracts investors

Investors need to see a comprehensive understanding of the industry to evaluate the potential success of a business.

A thorough industry analysis shows that the business is prepared for market challenges, making it a more attractive investment. Further, a well analyzed financial metrics help your business to:

• Set realistic business goals
• Measure success against industry standards
• Streamline investment decisions
• Mitigate financial risks
• Smoothen financial operations

Types of industrial analysis

How to conduct an industry analysis for your business plan.

Conducting an industry analysis for your business plan involves several key steps to ensure a thorough understanding of the market landscape. Here’s a step-by-step guide:

Step 1: Define the industry

Start by clearly defining the industry in which your business operates. Whether you're a manufacturing company, IT, or any other sector, it's essential to outline the specific nature of your industry.

To define the scope of your industry, use classification systems such as NAICS (North American Industry Classification System) or SIC (Standard Industrial Classification) codes.

These systems accurately define the scope of your analysis and ensure that you focus on the relevant market segment.

Step 2: Research market size and growth

Gather data on the market size and growth rate. Review reports, surveys, and studies from reliable sources such as government databases, trade associations, or market research firms.

Understanding market potential helps you gauge growth opportunities. Moreover, it helps your business with:

• Identifying untapped market opportunities.
• Planning realistic financial projections.
• Aligning resources with market demands.
• Understanding the competitive landscape.
• Forecasting future industry trends and shifts.

Step 3: Analyze market trends

Look for emerging trends that may impact the industry, including technological advancements, shifts in customer behavior, and current tastes of customers within your industry.

Notably, special attention should be paid to innovations and emerging technologies. Understanding current trends in your particular industry helps you identify the following:

• Potential customers
• Target market
• Unique selling proposition

Step 4: Analyze market trends

Crafting such a table streamlines your business analysis and helps you build a unique selling point. Make sure to refer to or craft such a table when shaping your strategy for differentiation.

Step 5: Identity target market and segments

Break down the market into demographics, needs, or behavior segments. Identify the specific groups your business will target. Examine different significant players, the industry’s size, and growth potential.

Such identification will allow you to tailor your products, services, and marketing strategies to meet the needs of specific customer segments.

Step 6: Review the financial performance of the industry

Look into the financial health of the industry. Assess profitability, cost structures, and margins within the sector. Examining financial performance provides insight into the potential for profitability and economic sustainability in the long run.

Here are the key components that you should review for the financial performance of the industry:

• Return on Investment (ROI)
• Cash Flow Trends
• Revenue Growth
• Cost Structures
• Profit Margins

Step 7: Examine potential risks and barriers to entry

Assess potential barriers to entry, competition intensity, and other external threats that may pose risks to your business. Understanding these challenges prepares you for obstacles you may encounter in the industry.

Here are a few obstacles and risks you should be aware of and analyze for the betterment of your business:

• High capital requirements
• Strict regulatory compliance
• Intense competition
• Supply chain disruptions
• Technological advancements

Your business can create strategies to overcome or mitigate potential challenges by evaluating these risks.

Step 8: Analyze customer needs and preferences

Focus on identifying what your customers want and expect from your product or service. Understanding these needs helps you tailor your offerings and strategies to meet market demand effectively.

From small businesses to larger enterprises, this step determines how your products and services will represent in the market and how they will help to solve the customer's challenge.

To analyze your customer needs and preferences, you can use the following platforms and aspects:

• Industry data
• Social media platforms
• Data from industry associations
• Government websites
• Customer survey and feedback
• Online forums and communities
• Consumer trend reports
• Search engine analytics (e.g., Google trends)

Step 9: Compile and interpret data

Organize all the information you've gathered into clear, actionable insights. Look for patterns, opportunities, and threats.

Compiling data properly will provide a well-rounded understanding of the market and allow you to make informed and strategic decision-making.

This blog has covered the definition, types, and significance of industry analysis in a business plan. We hope you will incorporate these insights into your business plan to drive success and effectively achieve your goals.

However, if you're seeking accurate industry analysis for your business plan, consider using our free AI-powered business plan generator .

You can create a comprehensive business plan by answering a few questions within a few minutes. Our platform analyzes various businesses and utilizes AI capabilities to generate a robust plan tailored to your needs.

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Frequently Asked Questions

What is an example of industry analysis in a business plan?

An example of industry analysis is a detailed examination of the competitive landscape for a new coffee shop. This includes identifying competitors, assessing market trends, and understanding customer preferences.

What are the five aspects of industry analysis?

The five aspects are market size and growth, competitive landscape, customer needs and preferences, regulatory environment, and financial performance.

What are the key components of industry analysis?

Key components of industry analysis include market definition, competitor analysis, market segmentation, trend identification, and risk assessment.

How can I present industry analysis in my business plan?

Present industry analysis using clear sections, tables, and visuals. Include concise summaries and relevant data to support your findings.

What are some common mistakes to avoid in industry analysis?

Avoid being too broad in focus, relying on outdated information, ignoring customer insights, failing to analyze competitors, and neglecting to assess potential risks.

As the founder and CEO of Upmetrics, Vinay Kevadiya has over 12 years of experience in business planning. He provides valuable insights to help entrepreneurs build and manage successful business plans.

Follow Vinay Kevadiya

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First Steps: Writing the Industry Section of Your Business Plan This quick guide offers tips that will help you create the industry section for your business plan.

By Teresa Ciulla Jan 4, 2015

Opinions expressed by Entrepreneur contributors are their own.

In their book Write Your Business Plan , the staff of Entrepreneur Media, Inc. offer an in-depth understanding of what's essential to any business plan, what's appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors outline what type of details you should include in the industry section of your business plan.

It isn't enough to just work hard. If you're in the wrong industry at the wrong time, making your business grow is going to be difficult. The investment community tends to believe that any business can be buoyed by an industry on the rise and that the opposite is true in an industry whose tide is ebbing. This means it's important for you to include an industry analysis in your business plan.

Readers of your business plan may want to see an industry on a fast-growth track with few established competitors and great potential. Or they may be more interested in a big, if somewhat slower-growing, market with competitors who have lost touch with the market, leaving the door open for rivals.

Whatever the facts are, you'll need to support them with a snapshot analysis of the state of your industry and any trends taking place. This can't be mere off-the-cuff thinking. You need to support your opinions with market research that identifies specific competitors and outlines their weaknesses and strengths and any barriers to entry into the market. You need to describe why your industry is valuable and how it will continue to be important. Finally, and perhaps most important, you'll have to convincingly describe what makes you better and destined to succeed.

When preparing the state of the industry section, instead of looking at your business as a self-contained system, you'll describe the whole industry in which you operate and point to your position in that universe. You then zero in on your country, your state and your local community, deepening on how far your business stretches.

This part of your plan may take a little more legwork than other sections because you'll be drawing together information from a number of outside sources. You may also be reporting on or even conducting your own original research into industry affairs.

To start preparing your industry analysis and outlook, dig up the following facts about your field:

1. What is your total industry-wide sales volume? In dollars? In units?

2. What are the trends in sales volumes within your industry?

3. Who are the major players and your key competitors? What are they like?

4. What does it take to compete? What are the barriers to entry?

5. What technological trends affect your industry?

6. What are the main modes of marketing?

7. How does government regulation affect the industry?

8. In what ways are changing consumer tastes affecting your industry?

9. Identify recent demographic trends affecting the industry.

10. How sensitive is the industry to seasons and economic cycles?

11. What are key financial measures in your industry (average profit margins, sales commissions, etc.)?

If your business addresses a trend before it's been widely recognized, you need to include this information in your business plan. Providing some statistics in the trends section of your plan can make it more convincing.

Barriers to Entry

If you want to become a semiconductor manufacturer, you'll need a billion-dollar factory or two. If you want to have a TV network, you'll need programming and cable carriage in the major markets. These problems are called barriers to entry, and they exist to some extent in all industries. The barriers may be monetary, technological, distribution or market-related, or they may simply be a matter of ownership of prime real estate.

An important part of analyzing your market is determining what the barriers to entry are and how high they stretch. If the barriers are high, as is the case with automobile manufacturing, you can be assured new competitors are likely to be slow in springing up. If the barriers are low, such as opening a nail salon, which doesn't have a huge overhead, you have more opportunity to get into the game.

Be alert for innovative competitors when writing the section of your plan in which you analyze barriers to entry. Clearly some markets are also more saturated than others, and today some are dominated by the McDonald's of their industry. For example, it's hard to open a bookstore today with Amazon changing the way people buy books. In that industry, you need to be creative and explore entry into specialty books, mystery books or another niche within the larger market. Exploring entry points in the marketplace carefully will save you from a disastrous error and will certainly demonstrate to investors that you've thought your plan through and aren't jumping to conclusions.

Identifying Competitors

You're not alone, even if you have a one-person business. You also have your competition to worry about, and your backers will worry about competition, too. Even if you're truly in the rare position of addressing a brand-new market where no competition exists, most experienced people reading your plan will have questions about companies they suspect may be competitors. For these reasons, you should devote a special section of your plan to identifying competitors.

If you had to name two competitors in the athletic shoe market, you'd quickly come up with Nike and Reebok. But these by far aren't the only competitors in the sneaker business. They're just two of the main ones, and depending on the business you're in, the other ones may be more important. If you sell soccer shoes, for instance, Adidas is a bigger player than either of the two American firms. And smaller firms such as Etonic, New Balance and Saucony also have niches where they are comparatively powerful.

You can develop a list of competitors by talking to customers and suppliers, checking with industry groups, and reading trade journals. But it's not enough to simply name your competitors. You need to know their manner of operation, how they compete.

Does a competitor stress a selective, low-volume, high-margin business, or does she emphasize sales growth at any cost, taking every job that comes along, whether or not it fits any coherent scheme or offers an attractive profit? Knowing this kind of information about competitors can help you identify their weaknesses as well as their names.

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