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Today’s business plan should be chock full of industry analysis. But don’t take our word for it. We asked the OPEN Forum community what they thought of this new numbers-driven plan.

Having a business plan that charts your intended course and helps you plan for the unexpected can keep you on track with your company goals. While there are many aspects to a business plan, one ingredient is an industry analysis.

Recently, OPEN Forum community member Angela Dougall asked, “Why is an industry analysis so important when putting a business plan together?”

As it turns out, there are several good reasons to include an industry analysis in your business plan.

Important First Step

An industry analysis is a critical, and necessary, first step before you define your plan, says Erik Otto, president and co-founder of InSpark Technologies, a small business that develops blood glucose pattern recognition software for the diabetes market. “You need to understand new competitive products, pricing changes, supply chain issues, customer dynamics and technology trends before you can figure out how to address them.”

Otto, who formerly worked in business development and strategic planning for Johnson & Johnson, uses the supply chain as an example. “What if one of your suppliers is going bankrupt? What if there is a new prohibition on the use of certain materials in your product? Without considering these facts before writing your plan, you could quickly be on back-order and losing substantial market share.”

Determine Placement And Fit

“When a business is just starting, developing a strategic plan that helps define who you are and what you do, as well as who your customers and competitors are, is essential,” says business coach Judy Sylvia, CEO of The Growth Coach.

Annice Johnson, an OPEN Forum community member and owner of style-consulting service Compliments, agrees that “understanding the industry’s movements—trends, competitors, products, technologies—is key to understanding where you fit.” She notes that longevity of product, product cycle and a host of such guiding information helps ensure that you’re going in the right direction.

Decide On Financial Goals

An industry analysis is a critical ingredient of your financial plans for your business as well. “Too often, companies define financial targets before doing an industry analysis and then realize too late that there is no way to reach their targets,” Otto says.

Sylvia concurs. “When I insist we make a revenue goal, many small-business owners make it 10 times more than what their revenues were for the previous year—completely unrealistic with no thought as to whether it’s feasible,” she says. A thorough industry analysis will tell you if hitting your mark is doable.

The Business Plan Evolution

When it comes to today’s business plans, less is often more. “I’ve seen an evolution toward more sophisticated planning that arrives at simpler plans,” Otto says. “The process is a lot more data intensive, analytical and full of customer insights, yet drives just a few robust strategies. There is less focus on defining detailed tactics, especially in the later time-frame of your plan, because there is a recognition that the business environment is changing so rapidly.”

Sylvia has found that many small-business owners do an extensive initial plan, but it just collects dust. “If financing or investors aren’t a component of a business plan, I work with business owners to put together a simple action plan for the year,” she says. “I want this simple action plan to be marked up with notes and obviously worn from frequent use.”

To be as prepared as possible for the competitive landscape, your business plan should include the following data and analysis:

• Sales trends of all products
• Recent market research results
• Competitor share changes
• Competitor product launches (known and suspected)
• Industry pressures
• Opportunities in pricing
• New technology
• Suppliers
• Threats of potential substitute products
• Marketing tactics that have worked

Resources For Industry Analysis

While many public and private sources of information exist that will benefit your business plan, such as industry statistics and data from services including Hoover’s First Research or IBISWorld, “real-life” action plans and experiences with your business are the best, Sylvia says.

Otto suggests looking to your customers for relevant industry analysis data. “The best insights come from your customers,” he says. “Try to understand how their purchasing habits are changing and look at any complaints you’ve received. These insights are sometimes the easiest to obtain, and an in-depth understanding of the customer should be the primary focus of any business.”

A freelancer since 1985, Julie Bawden-Davis has written for many publications, including Entrepreneur, Better Homes & Gardens and Family Circle.

Read more articles on business growth.