Track Record Trumps Market Statistics 1

I received this interesting question today:

” I am trying to create an on-going business plan for our auto accessory retail store. We are in the midst of expanding and were told that we had to develop a new business plan before we could apply for financing/loans. I don’t know where to begin. I’m not sure what market statistics should be included. I’ve purchased your software. I have gone to a number of the sites recommended and still can’t seem to find what I am looking for. Any help would be appreciated!”

I don’t think lenders reading a business plan from an existing company pay very much attention to market statistics. They will focus quickly on your company’s financial history. If the fundamental financials — profits, balance, credit rating — look good then the lenders assume you know your market. You get the benefit of the doubt. If the fundamentals look bad, on the other hand, you can’t make up for it with market statistics.

I don’t mean to imply with this that you don’t want to take a fresh look at your market as part of your plan.  You do. Your question, however, seems to show more worry about that than about the financial fundamentals.  The market analysis is a vital part of every business plan. It just isn’t the most important thing to lenders.

Going on then to actually answer the question above, I recommend the “Know Your Market” chapter of the book ‘Hurdle: the Book on Business Plans’ that is bundled with your Business Plan Pro. Even if you don’t have the retail package that includes the physical book in the box, it is still included with all versions including download-only as an ebook copy that is automatically installed. You can locate it by clicking the “Resources” icon in toolbar area of your Business Plan Pro.

Regarding what statistics to include, start with what you’ve already purchased, meaning the don’t industry profiles bundled into your Business Plan Pro, as part of the software, at no additional cost.  Go to the ratios table and use the keyword search to find the right SIC code auto accessories — I think you’re in SIC code 5531, but you’ll know better, so use the search — and pull that information into your ratios table. That includes an annual sales growth for the last five years. Then find the Hill Research Library and ask them — with Business Plan Pro you get two questions free — for a market profile of that same SIC code. They’ll come back with good information.  That may be as much market information as you really need, without you having to look any further.

Beyond that, if you want to keep looking for more, trust your instincts and experience. You’re already in the auto accessory retail business, what statistics do you think make sense? Is there a trade association you deal with? Local automobile registrations, local retail sales, growth in your own sales, opening of new competitors? Look to your state department of motor vehicles for statistics on automobile ownership in your area.  Read the page on how to use statistics for tips on how to narrow down what the census offers.

But, with apologies for repeating, market stats aren’t the main thing a lender will look for. Your financial history will make much more difference.

— Tim Berry —

About the Author Tim Berry is the founder and chairman of Palo Alto Software and Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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