subject: What Are The Key Components Of A Business Plan [print this page] The industry analysis section of a business plan is sometimes overlooked by entrepreneurs focused on the specifics of their business. However, this section offers an important opportunity for the business owner to step back and relate their planned business to the larger market it operates within. This is a chance to look at the attractiveness of the industry as it relates to new firms starting out, cost and revenue drivers which will be key determinants of the businesss financial situations, and trends and projections of where the industry as a whole is headed in the future.
Industry Attractiveness
Industry attractiveness was famously broken down by Michael Porter using his Five Forces framework. Porter believed that the attractiveness of an industry, or potential profitability of a business in that industry, is to a large part determined by five forces: the bargaining power of suppliers, the bargaining power of customers, the threat of substitutes, the threat of new entrants into the industry, and the intensity of competitor rivalry. Ideally, these five forces are low, allowing a company in the industry to thrive. However, knowing the specifics of these five forces gives a company the chance to devise a successful strategy even when some of these forces are high.
Cost and Revenue Drivers
By knowing the key costs and revenue streams of a company in the industry, readers of your business plan are set to understand how you will compare to the industry at large. They would like to see you either follow industry norms or be clear about how and why you break from them, if you choose to do so. Not every business has to create entirely new revenue streams and you can be more successful in achieving funding if your plan instead shows how you will grab market share through methods similar to industry norms.
Trends and Projections
Finally, examining research and reports on trends and projections for the industry you are in allows readers to understand how you will take advantage of or defend your company from these future forces. You should be clear that you understand your business will be dealing with the market situation one, five, and ten years in the future and not the exact market situation at the time of the plans writing. Dont ignore powerful trends which you dont feel are in your business plans favor. Potential funders will eventually hear about these and wonder why you did not present this information in your plan in the first place.
by: Eric Powers
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