Usually, banks and venture capital firms make the existence of a viable business plan a prerequisite to the investment of funds in a business.
The factors that are hurting and helping other players in the industry will also impact your business. In fact, the way your business responds to them might constitute part of its competitive advantage.
Potential financiers will want to see that you have a thorough understanding of how your industry works and where your business fits in. It was probably an observation or a series of observations about the conditions in your industry that made you decide to open your business in the first place. You noticed a trend or an opportunity that you could exploit to earn a profit.
Now you just need to put that into writing and back it up with data. The Industry Analysis is the first section of your plan where you can and should go into detail instead of merely summarizing.
Defining Your Industry The industry overview for your business plan, also called a market analysis, should define the industry that your business belongs to, the major characteristics of that industry and its major existing players.
Where do their strengths and weaknesses lie? How will your business be able to compete with their strengths and improve on their weaknesses? A local foods business, for example, would be part of the grocery store and supermarket industry.
Is the industry new, expanding or stable? Is it growing faster, slower or at the same pace as the economy as a whole? For example, because all of your food will come from within a mile radius, your business will be strongly affected by seasonal changes in the availability of fruits and vegetables.
Analyze the main products and services provided by the other companies in your industry, and their major competitive advantages and disadvantages. Make sure to go into detail. For example, when looking at the products and services provided by grocery stores, in addition to the obvious answer — grocery stores sell the food people eat on a daily basis — you should note the specialty services offered by your competitors, such as freshly prepared hot meals, grocery delivery, butchers, freshly brewed coffee, pharmacies, gift card sales, lottery tickets, movie rentals, banking services and so on.
When describing your major competitors, you would include not just other grocery stores, but also mass merchandisers, warehouse stores and online stores that sell food. And while people need food year round and in all economic climates, they do tend to buy more near major holidays like Thanksgiving and Christmas.
Opportunity Where does your company fit into the industry?
Having a compelling answer to this question is crucial to your sales pitch. Be sure to identify what other businesses lack that you will provide. You need an answer to the question: Why would someone visit your store instead of their local farmers market or Whole Foods or instead of using a meal-preparation delivery service like Blue Apron?
How do businesses make money in your industry?
This might sound like an obvious question, but think about it more carefully. Do you really know where and how grocery stores make money, for example? What wholesale prices can you expect when purchasing food from local farmers? By what percentage can you mark up your products and still be competitive?
Which types of discounts can you profitably offer during sales? What will your employees expect to be paid? When writing your industry analysis, be realistic. All is not rosy in any industry, so you need to identify and analyze potential risks to your business.
Potential lenders and investors will expect that you have, too. Identify the major suppliers and distributors in the industry, and evaluate how effective and accessible the existing suppliers and distribution systems in your industry are.
Describe where your business will get its supplies from and how it will get those supplies to your business location.
Will you need to hire drivers to go to their farms? How frequently will you need to meet up with each farmer to get fresh produce, meat and dairy?
Consider any challenges you might face along the way and create a plan to overcome each one. How will you placate customers in that situation?
Will you stock items from further away? Offer discounts on future shopping trips? Legal, Economic and Political Factors Consider the national, state and local issues that impact businesses similar to yours.
How is your business affected by environmental issues, trade regulations, labor relations and health and safety regulations, for example? Consider the current business environment and the potential changes that could affect the industry.Writing your business plan. From Innovation, Science and Economic Development Canada.
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