The Industry Analysis section of your business plan gives readers an overview of your industry and market.
Doing this is critical since it lets readers know your truly understand your market. It also proves to the reader that your market is large enough to support the success and growth of your company.
The Industry Analysis section has two key sub-components: Market Overview and Relevant Market Size.
In your market overview, you will define the market in which you are competing (e.g., restaurant, medical devices, etc.).
You will then detail the sub-segment of that market if applicable (e.g., within restaurants there are fast food restaurants, fine dining, etc.).
Next you will describe the key characteristics of your market. For example, discuss how big the market is in terms of units and revenues. Let the reader know if the market is growing or declining (and at what rate), and what key trends are facing your market.
Use third party research as much as possible to validate your discussion of your industry.
Relevant Market Size
Next, in your industry analysis, you need to determine your “relevant market size.”
Your relevant market size is the annual revenue that your company could attain if we owned 100% market share.
The formula is simple.
First, enter the number of customers who might be interested in purchasing your products and/or services each year.
Then enter the monetary amount these customers might be willing to spend, on an annual basis, on your products and/or services.
The product of these two figures is your relevant market size. Calculate this figure here so your readers understand the size of your market opportunity and can confirm it’s big enough (particularly if you are seeking debt or equity capital).