| The industry analysis section of a business plan is | | | | Cost and Revenue Drivers |
| sometimes overlooked by entrepreneurs focused on | | | | By knowing the key costs and revenue streams of a |
| the specifics of their business. However, this section | | | | company in the industry, readers of your business plan |
| offers an important opportunity for the business owner | | | | are set to understand how you will compare to the |
| to step back and relate their planned business to the | | | | industry at large. They would like to see you either |
| larger market it operates within. This is a chance to | | | | follow industry norms or be clear about how and why |
| look at the attractiveness of the industry as it relates | | | | you break from them, if you choose to do so. Not |
| to new firms starting out, cost and revenue drivers | | | | every business has to create entirely new revenue |
| which will be key determinants of the business's | | | | streams and you can be more successful in achieving |
| financial situations, and trends and projections of where | | | | funding if your plan instead shows how you will grab |
| the industry as a whole is headed in the future. | | | | market share through methods similar to industry |
| Industry Attractiveness | | | | norms. |
| Industry attractiveness was famously broken down by | | | | Trends and Projections |
| Michael Porter using his "Five Forces" framework. | | | | Finally, examining research and reports on trends and |
| Porter believed that the attractiveness of an industry, | | | | projections for the industry you are in allows readers |
| or potential profitability of a business in that industry, is | | | | to understand how you will take advantage of or |
| to a large part determined by five forces: the | | | | defend your company from these future forces. You |
| bargaining power of suppliers, the bargaining power of | | | | should be clear that you understand your business will |
| customers, the threat of substitutes, the threat of new | | | | be dealing with the market situation one, five, and ten |
| entrants into the industry, and the intensity of | | | | years in the future and not the exact market situation |
| competitor rivalry. Ideally, these five forces are low, | | | | at the time of the plan's writing. Don't ignore powerful |
| allowing a company in the industry to thrive. However, | | | | trends which you don't feel are in your business plan's |
| knowing the specifics of these five forces gives a | | | | favor. Potential funders will eventually hear about these |
| company the chance to devise a successful strategy | | | | and wonder why you did not present this information in |
| even when some of these forces are high. | | | | your plan in the first place. |