industry description in business plan

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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.

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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 Effective Business Plan: Industry Profile

Last Updated on March 16, 2024 by Treana Wunsch

Having an industry profile section in a business plan is essential for success. It serves to provide the reader with background information on the industry, along with its current trends and future projections. This section will help to assess whether or not an idea is feasible, as well as how competitive it may be in the marketplace.

The industry profile should include both qualitative and quantitative data. Qualitative data can illustrate points such as the current market share of competitors, product, price, promotion and distribution trends or any other relevant factors that may affect the business’s ability to succeed. Quantitative data consists of numerical figures like sales volume and growth rate of particular products within the industry over time.

Including this kind of information will help potential investors understand why your business should exist by highlighting its unique niche within the marketplace.

What is an industry?

An industry is an economic sector that produces goods and services. It is the driving force behind a country’s economy. Industries can range from large-scale enterprises with hundreds of employees to small, family-run businesses. As such, each industry has unique characteristics that must be taken into consideration when writing an effective business plan.

When researching an industry for your business plan, it’s important to understand the factors affecting its performance, including market trends and government regulations. Additionally, you should consider the competition in the market – both current players and potential new entrants – as well as customer habits and preferences. All this information will help you gain insight into how best to position your business within this particular industry in order to succeed.

Industry classification

When creating an industry profile, it’s important to understand the classification system used by experts in the field. This includes macro industries, subsectors, industries and even trade groups, each of which provides further detail on a company’s market.

The North American Industry Classification System (NAICS) is one of the most widely used systems for classifying businesses by type of activity and geographic location. It categorizes establishments based on their primary production process or product line and assigns them a six-digit code that uniquely identifies them within their sector. The NAICS also makes it easy to compare businesses across different sectors and regions by grouping similar companies together under broader categories such as transportation or manufacturing.

How to find your industry

Finding the right industry for your company is a crucial step in the process of writing an effective business plan. Understanding what industry you are entering and who your competitors are will help determine how to structure your plan and position yourself in the market. Knowing where to start can be challenging, so here are some tips on how to find your industry and create an effective business plan.

First off, research current trends in the market and identify areas that you believe have potential for growth or represent a good fit for your company’s products or services. Look at macroeconomic data from government sources such as the Bureau of Labor Statistics, as well as industry-specific reports from organizations like Forbes or Business Insider. Analyze these reports to determine which industries may offer more potential than others, then narrow down your choices by researching key factors such as demand, competition and capital requirements within those industries.

How to find your industry NAICS code

The first step in writing an effective business plan is to identify your industry and the associated North American Industry Classification System (NAICS) code. NAICS codes are used by governments, businesses, and other organizations to classify industries according to the type of economic activity they engage in. Knowing your industry NAICS code is essential for gathering information about your industry and its competitive landscape, as well as determining which regulations apply to you.

Fortunately, it’s easy to find out what your industry NAICS code is. To begin, visit the Statistics Canada website and use their searchable database of NAICS codes. You can also contact a government agency or trade association related to your industry for more help finding your specific NAICS code.

Financial Performance Data by Industry in Canada

Financial performance data by industry in Canada is an important factor to consider when writing an effective business plan. Knowing the key financial ratios specific to your industry will help you benchmark your performance, identify potential weak spots and develop strategies for growth. Different industries have their own unique financial metrics with which they measure success. It is important to understand these ratios and how they apply to you and your target market before writing a comprehensive business plan.

By analyzing the common financial trends of businesses within certain industries in Canada, you can gain valuable insight into how successful companies in that sector operate. Using this information, you can adjust your strategy accordingly so that it meets or exceeds the expectations of investors and other stakeholders involved with your venture. The ability to effectively identify industry-specific financial indicators gives businesses a competitive edge that can result in greater profitability over time.

You can find your industry’s financial performance here . Choose the location you want data from then choose ‘total revenue’ and ‘percentage’ and ‘search for an industry’ as your other options. Then type your NAICS code that you discovered under ‘Search for an industry’ and click on ‘search’.

Your options will come up below. Choose the appropriate option and ‘create report’.

If balance sheet data is available it will also be shown.

The lower portion of the report indicates the percentage of businesses that are profitable.

You can also do an internet search of the NAICS code to see what else comes up.

Industry codes help you to discover your specific industry and define the boundaries of that industry. Understanding the health of your industry and where the future of the industry may be going offers valuable insight into how successful your business could be. You can also measure your business performance against industry performance. All of this helps you to make better decisions for your business.

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Industry Lifecycle

Industry Lifecycle is an important concept for any business to understand and plan for. It is the process of a given industry maturing over time and passing through distinct stages of growth, decline, and eventual restabilization. Knowing the lifecycle of an industry can help you plan ahead by understanding where it is currently, what its likely future will be, and how to best capitalize on its strengths while minimizing weaknesses.

To write an effective business plan, an understanding of the industry’s current position in its lifecycle is essential. This knowledge will help you create realistic goals and strategies that are tailored to your specific market conditions.

This section should provide a comprehensive overview of the industry and its particular lifecycle. The lifecycle of an industry often determines how successful businesses in that sector will be and what strategies are best for them to pursue.

In order to determine the lifecycle of an industry, you must look at key factors such as trends in demand, competition from substitutes or new entrants into the market, technological advances, and changes in consumer preferences. It’s also necessary to assess potential risks within the sector including shifts in regulations or economic dips that could negatively impact performance. Additionally, you should consider how long the industry has been around and whether it’s likely to grow or decline over time.

The automotive industry is a good example of the industry lifecycle. It began with a period of introduction, followed by growth, then maturity and eventually decline. During the introduction phase, new technologies like the automobile were developed and brought to market. There was strong growth as the market for automobiles expanded. As the industry grew, it matured and reached a stable point where existing companies competed. Eventually, the industry declined as new technologies and sources of energy made it obsolete.

Industry History

It’s essential for aspiring entrepreneurs to have a basic understanding of the history of their chosen industry. Industry history is used to build an understanding of the current state of the market, as well as its potential for growth in the future. By studying past trends and developments in an industry, entrepreneurs can identify successful strategies that have been employed by previous businesses, enabling them to develop a comprehensive business plan that stands out from competitors. Moreover, they can use this information to gauge how quickly or slowly their venture may grow over time.

Industry Leaders

Industry Leaders are the heart of any successful business. Whether you’re launching a startup or expanding an existing business, understanding your industry and its leaders is essential for success. An effective business plan must include an industry profile to demonstrate comprehensive knowledge of the competitive landscape and identify strategies for establishing a foothold in the market.

An Industry Profile is a detailed analysis of your industry’s size, structure, growth rate, key players, trends and more. It begins with examining leading companies – their products/services; target markets; operations & financials; competitive advantages – and how they contribute to industry dynamics. Knowing who sets the standard in terms of quality, innovation & sustainability will also help evaluate customer preferences & overall satisfaction levels within the sector. Once identified, these insights can be used to craft actionable plans that position your company as a leader in its respective field.

Industry Threats

To create an accurate industry profile, you must carefully consider the various external factors that can potentially threaten your company’s operations. These threats may include changes in laws or regulations, economic conditions such as inflation or recession, competition from other businesses, technological advances, new entrants into the market, and customer preferences.

By analyzing these elements of your industry and assessing their potential impact on your business plan, you can better anticipate changes in the environment and develop strategies to minimize any adverse effects these threats might have on your company’s profitability.

Industry Predictions

Industry predictions can help businesses stay ahead of the curve and plan for the future. When researching your industry profile, it is essential to look at key economic indicators such as consumer spending habits, employment rates, and capital investments. Additionally, consider major disruptors like technological advancements or regulatory changes that may influence your market dynamics over time. By gaining a comprehensive understanding of these factors, you will be better equipped to make informed decisions when creating your business plan and developing strategies for growth.

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Industry associations.

Industry associations play an integral role in the development of a business plan. They provide industry professionals with information, resources, and contacts to help them create successful business plans and gain strategic insights into their industry. Furthermore, they can also help entrepreneurs identify potential customers and develop marketing strategies based on current industry trends.

The first step to utilizing an industry association is researching the available options and learning about their current activities. After finding one that fits the needs of your business plan, it’s important to join the organization so you have access to all the benefits they offer. Once you’ve joined, be sure to take advantage of any educational opportunities or events designed for members; these are excellent ways for entrepreneurs to network with other professionals in their field and learn more about specific trends related to their industry.

Industry Statistical Analysis

Industry statistical analysis is an important part of writing an effective business plan. Accurate and up-to-date industry data can provide invaluable insight into the current trends, potential risks, and opportunities in a particular market. Taking the time to research recent industry developments allows entrepreneurs to make more informed decisions regarding their business strategies going forward.

When conducting your own industry statistical analysis as part of a business plan, it’s important to look at both economic indicators and demographic trends for relevant market segments. Analyzing existing sales figures for similar businesses or products is also essential for understanding the size of the opportunity or assessing competitive threats. In addition, looking at various macroeconomic trends such as inflation rates or GDP growth can help inform your projections about future performance within the industry.

Putting it all together

Once you’ve gathered all your data, you’ll summarize it in your business plan. It may look like the following example:

As with any section of your business plan, this section required regular review and updating.

That's All Folks...

I hope with this information you will find it easier to write the Industry Profile section of your business plan. Up next…Marketing Strategy.

If you have questions, please comment below and I’ll be happy to answer them.

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• Business Planning

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.

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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.

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