A standard business plan should explain the general state of the industry and the nature of the business. You might be able to skip this for an internal plan because most of the target readers already know the industry, but even in this case, taking a step away and taking a fresh look can be valuable.

Whether you’re a service business, manufacturer, retailer, or some other type of business, you should do an industry analysis, describing

  • industry participants.
  • distribution patterns.
  • competition.

There is plenty of information available — too much, in fact; your hardest task is sifting through it all. There are websites for business analysis, financial statistics, demographics, trade associations, and just about everything you’ll need for a complete business plan.

Industry Participants

You can’t easily describe a type of business without describing the nature of the participants. There is a huge difference, for example, between an industry like long-distance telephone services, in which there are only a few huge companies in any one country, and one like dry cleaning, in which there are tens of thousands of smaller participants.

This can make a big difference to a business and a business plan. The restaurant industry, for example, is what we call pulverized, which, like the dry cleaning industry, is made up of many small participants. The fast-food business, on the other hand, is composed of a few national brands participating in thousands of branded outlets, many of them franchised.

Economists talk of consolidation in an industry as a time when many small participants tend to disappear and a few large players emerge. In accounting, for example, there are a few large international firms whose names are well known and tens of thousands of smaller firms. The automobile business is composed of a few national brands participating in thousands of branded dealerships. In computer manufacturing, for example, there are a few large international firms whose names are well known, and thousands of smaller firms.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.