What Information Should Be Included In The Industry Section Of A Business Plan?

Posted on by Brian Colwell

The industry section of one’s business plan should include two sub-sections – a market analysis and a competitive analysis.

Market Analysis

According to the US Small Business Administration (SBA): “You’ll need a good understanding of your industry outlook and target market. In your market research, look for trends and themes.”

This part of the business plan should demonstrate one’s knowledge regarding the industry in which his/her business is to engage. At the top level, the market analysis section provides an indication of the growth potential within an industry. The purpose of this section is much larger than an analysis of a market, however – the Market Analysis leads to the confirmation and improvement of one’s business idea and planning by defining the business’s target market and detailing its target users, as well. This then leads to the business developing financial estimates for its future and detailing the market positioning, pricing, sales and promotional strategies that will allow the company to become profitable within a competitive environment.

What Is Included In The Market Analysis?

The Market Analysis should include an industry outlook, details on the business’s target markets, and a deep dive into user, or buyer, personas. The Market Analysis should also provide basic statistics and key information from any marketing research data thus far obtained; however, itemized details of market research studies should be placed in the Appendix section of the business plan.

Industry Outlook

The Industry Outlook is a summary of one’s market research, defines the market in terms of demand, size, trends, and growth potential, and should provide the following information in order to get a good sense of one’s market:

  • Total market size
  • Demand
  • Trailing , current, and expected growth rates
  • Market trends and characteristics, such as the life cycle stage of the industry

Target Market

Once the Industry Outlook has been completed, the Target Market section of the business plan can be detailed. The Target Market explains how the company fits within the industry, reiterates the business’s strengths, and narrows the industry’s total market by concentrating on segmentation factors that determine the business’s addressable market – the actual number of users within the sphere of the business’s influence. The purpose of the addressable market determination is to answer the questions: “What is the expected consumer demand for my product or service?”, “What gap within the market does my business fill?”, and “What are the various opportunities and limitations for my business gaining customers?”

When defining a target market, it’s vital to narrow the group to a realistic volume. That said, it is worth noting that the addressable, or feasible, market is the portion of the market that can be captured provided every condition within the environment is perfect and that there is very little competition – a situation that rarely occurs, if ever. Within the Target Market section, one should gather information that identifies the following:

  • Key characteristics of the primary group to be targeted. This segment should include information about the critical needs of future customers, the level to which those needs are currently being met, and the demographics of the group (not the individual user). Also identify any seasonal or cyclical trends that may impact the industry or the business model.
  • Size of the target market, including expected market growth for this group and, broadly, the geographic areas inhabited.
  • The magnitude to which a business expects to obtain market-share, the ease with which this market-share is expected to be obtained, and why this growth is expected.  
  • Trends that affect potential customers, coupled with fundamental features of the subsequent markets.  As with the primary target market, it is important to pinpoint the needs, demographics and developing trends that are going to affect the secondary markets later.

User Personas

Full profiles can be created for target customers once the Target Market has been clarified. Referred to as “User” or “Buyer” Personas, these profiles gather information intended to shed light on exactly who the customer is, where they will be found, how to reach them, and, most importantly, how the business’s product or service will be sold to a specific customer type. Consider this – in what ways are the Target Market and User Personas different, how are they similar, and what if-this-then-that conclusions can be made from the data? A full profile for a single User Persona should include information on Demographics, Geographics, Psychographics, and Behavioral Attributes:

  • Demographics – age, gender, income, education, occupation, marital status, family, wealth
  • Geographics – location (country, region, state, city, town), climate, culture
  • Psychographics – lifestyle, attitudes, risk tolerance, aspirations, personality, values, struggles, pain points, goals, interests, needs, problems
  • Behavioral attributes – preferred channels and content types, loyalty, frequency of purchases, affiliations, shopping and buying habits and patterns, media frequented

Competitive Analysis

According to the US Small Business Administration (SBA): “Competitive research will show you what other businesses are doing and what their strengths are. What do successful competitors do? Why does it work? Can you do it better? Now’s the time to answer these questions.”

The competitive analysis should identify the business’s competition by product line or service and market segment, and assess the competitive landscape in terms of market share, strengths and weaknesses, window of opportunity to enter the market, and barriers to market entry. The Competitive Analysis also identifies the importance of the business’s target market relative to its competitors and the ways in which indirect and secondary competitors may impact one’s business success.

What Is Included In The Competitive Analysis? The SWOT

This is where competitive SWOT Analysis will be conducted, identifying competitor Strengths, Weaknesses, Opportunities, and Threats. SWOTs look at the internal and external environments in which a business operates, and are often an early step in a Risk Assessment. Questions to answer in the Competitive Analysis, such as “Who is the competition?”, “How will the business be differentiated?”, and “How many similar options are already available to consumers?” (market saturation), should all be answered through the SWOT.

Strengths

Strengths refer to what a business does well, tangible assets and internal resources, and what sets the business apart from the competition.

Weaknesses

Weaknesses include areas where the business needs to improve, resource limitations, and places where competitors are excelling.

Opportunities

Opportunities refer to the industry as a whole, including underserved markets, lack of competitors, growing popularity for the products/services one’s business provides, and positive media coverage of the industry.

Threats

Threats include parts of the external environment that could potentially harm one’s business, such as new laws and regulations, negative media coverage, decline of one’s industry, and emerging competitors.

While conducting a competitive SWOT Analysis, it is critical to identify the competition’s product-lines or services, market segment, and market share – Use this information to determine competitor strengths, weaknesses, and opportunities in order to better understand threats such as:

  • The relationship between one’s target market and one’s competitors
  • Roadblocks that may interfere with entering the marketplace
  • When new competitors will enter into the marketplace
  • The limits of time on one’s window of opportunity

The structure of a SWOT analysis is shown in the image below.

The structure of a SWOT Analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threads.

Thanks for reading!