A clear understanding of your industry and your company's position within it are crucial to your success. You've got to communicate what your purpose is as a company. This section describes the industry that your company will operate within, how you will position your product or service within that industry and why your business is viable. Your challenge is to clearly describe what your company is going to do and why that's special. The Business Environment section includes the following subsections:
Business Summary & History
This section should describe the overall picture, from the time the business was started (if started before writing your business plan) to what stage your business is at presently. This is where you should outline the work you have done so far and any sales (if any) you have made to date.
It is important to give some background on the industry you will be working in. Describe some of the trends in your industry, along with the growth prospects of the industry. It is important to summarize the various sectors within your industry since this will set the stage for the description of where your company will operate.
Your Industry Overview should cover the following:
- What is the total size of your industry? (potential sales, number of customers, etc.)
- Are there seasonal factors that affect the industry?
- Describe any trends that affect your industry (eg. interest rate sensitivities, government regulations, seasonality). Are they increasing or declining?
- What kind of long-term outlook does your industry have?
Position in the Industry
Most new businesses that succeed do so because they find a small part of an industry that they can call their own - commonly called a "niche". You must describe what product or service you will be selling, what makes it unique and how you will carve out a place within the existing industry.
This section should cover the following:
- Briefly describe your product(s) or service(s). Give an honest assessment of its strengths and weaknesses. Be sure to include how your product or service is unique.
- Describe how you plan to protect what makes you unique. Do you have legal protection like patents, trademarks or copyrights?
- Who are your competitors? What percentage of the market do they control? What are their strengths/weaknesses?
- What are the barriers to entry in your business? How easy is it for your competitors to duplicate your unique product or service?
- Describe what role technology plays in the creation of your product or service. Does this make it easier or more difficult for competitors to offer a similar product or service?
To see examples of the Business Environment section of a sample business plan, click on any of the company logos below: