Doing an Industry Analysis

This section of the business plan puts your business in the context of the larger world of businesses in your industry and helps you focus on how your business stacks up compared to its competitors and how it differentiates itself with its customers. This section, like the others, must continue to give the reader data to convince that this is a business worth the time and energy and investment that will pay off in profits in the long run. This section in particular, must show that the number of potential customers is large enough to sustain the business, and that the industry is growing in terms of these potential customers.

Each business plan will need to cover information about the:
• Industry (national and local statistics and trends)
• Competitors (national and local)
• Customers (demographic profile)

The tough questions that have to be answered in this section: Will the current market welcome your product or service entry? Is the timing right, is there an unanswered opportunity? Is the market growing for what you are selling?

So far we have been concentrating in the plan on information specific to your business. Now we put your business in the context of the larger world and take a look at what your place will be in that world. That larger world will include other businesses like yours and what will make your business succeed with customers in the industry as it is, against your competitors.
To find out about the industry as a whole, you will need to do market research. Market research can be primary (data-gathering from actual users via surveys, focus groups, interviews, etc.) or secondary (from books, periodicals and web sites, written by industry experts or gathered by trade associations or the government). If you have an existing company, investors would expect you to use primary data from customers. Secondary data is more common for new businesses.
Most smaller businesses do this research themselves, although professional researchers can do it for them. It is also possible for an entrepreneur to hire a university student to do the research as a business school project.
What you are looking for in this research are statistics, mostly. Numbers that help you make your case that this is a viable business by showing that you will have a large number of potential customers to sell our product or service to.

How much information you need to provide in this section depends on several things: whether your company is local or national or even international, whether you are looking for a loan or investors in your company, and whether you are looking for a small amount of money (less than $500,000), or a significantly greater amount. In each case, if you are local, and looking for a relatively modest loan, you will need only a few paragraphs of information. If you are intending to be a national company, planning for aggressive growth, and looking millions of dollars from investors, you may need a lot of information to make your case and entice these people that the market is large enough and the opportunity is equally grand.

Getting Help with a New Business

Now take a skills and experience inventory of your team: you, your key employees, your professional advisors. What is still missing? Do you have both demonstrable skills and experience in all the key areas of finance, marketing, product development, operations, and general management? Do you have people you can call at a time of crisis? Do you have people who will help you talk through your opportunities to see which you should take and which you should leave behind?
Create a Board of Advisors from these professionals and others. A Board of Advisors is usually made up of from 4 to 8 individuals, each of whom brings a different type of expertise (marketing, finance, operations, product or service expertise, human resource, strategy, etc, in your industry or not.) These are people who you have asked to help with advice on running your company because you respect their judgment and their expertise.

Consider adding a board of advisors for two reasons: First, it will add tremendously to the credibility of your plan, and second, every business owner needs one.
Unless you are incorporated and have a Board of Directors, you as the business owner report to no one. And maybe this is exactly why you wanted to have your own business. But human nature is to work more slowly than our potential if we aren’t accountable to someone for our work. Make yourself accountable for your own goals with a board of advisors.
Don’t deprive yourself of all the help you can get. Consider potential sources of help from these categories:

Trade Associations
Government or Educational Institutions
Successful Entrepreneurs
Suppliers
Professionals in your industry
Other professionals (attorneys, accountants, insurance agents, real estate brokers, bankers, consultants)

A Board of Advisors is not the same as a Board of Directors. A Board of Directors has a legal responsibility to the shareholders of a corporation. A Board of Advisors has no legal obligation to make decisions – it is created only to give advice to the business owner. Advisors, therefore, don’t have the same personal liability as Directors do.

Boards of Advisors usually meet quarterly. Help your Board help you by setting an agenda for the meeting, and sending the Board some information on how the company is doing ahead of time. Plan to meet for about 3 hours per session. Your agenda should include all the major questions you would like to have help in answering, both problems you are wrestling with and the upcoming opportunities.

Besides the quarterly meetings, Advisors should expect to be available to you by phone and should also be expected to review monthly reports or updates and telephone you with their questions. Advisors will probably spend about 10 hours per quarter on your business.

If you are a start-up, advisors may agree to meet without pay. Once you have completed your first successful year in business expect to pay advisors anywhere from $500 up per a quarter. This is some of the smartest money you can spend.