Business Planning Considerations: Industry Conditions and Forecasts
Understanding the larger forces at work in your industry is a crucial part of business planning. To help you formulate your business plan based on these conditions, ask yourself these questions:
What are the immediate and long-term growth, product, and pricing trends in your industry?
Is market demand for your industry’s offerings growing, shrinking, or holding steady?
Is it easy or difficult for new competitors to enter your industry?
How fast are technologies, regulations, or other fundamentals of your industry changing?
Has your business adapted to changes in your industry, and how well are you prepared to adapt to the changes you see on the horizon?
Answers to questions like the preceding ones are key to creating a successful business plan. By compiling a good overview of your industry, you gain a better sense of how and where your business fits in and what it will need to do to become and stay competitive — insights that will help you sidestep trouble and chart a better course.
What you don’t know can hurt your business, so take the time to do some research and to uncover the facts. For example, if a few suppliers control most of your industry’s material costs, you can make sound decisions based on that knowledge — or you can overlook that fact and have it come back to haunt you later.
After you complete the questionnaire, look over your answers and single out areas that are most apt to influence your future:
How serious a competitive threat do you face?
Who really drives your industry: customers, distributors, or suppliers?
Will you be able to ride the rising tide of an expanding industry, or will you have to find ways to succeed in spite of a general industry slowdown?
Do you anticipate major transformations –– in technology, production processes, global influences, or customer buying patterns –– that could affect your competitive position and profitability?
Any one of the forces, trends, or issues you identify just may be the one that holds the key to your success.
Summarize the findings from your industry analysis and include your overview in the business environment section of your written business plan.