1. Before You Start a Business Understand the
Industry
If you are planning to start a business and you are going to be looking to investors or banks for
all or part of your capital be prepared to show the lenders that you understand the industry you
are planning to compete in. Many entrepreneurs don’t recognize that no matter what happens in
that industry it will affect your business, so the more you understand the industry the better
prepared you will be and the more likely you will be to succeed.
When you do a business plan, it includes discussion on the economics, distribution, competition,
and any other relevant factors of that industry. It describes to outsiders the nature of the business
and the industry you are planning to operate in.
Thanks to the internet, the collection of industry information is no longer a problem. There are
all kinds of websites that are packed with financial statistics, business analysis, trade
associations, and demographics on just about any industry you can think of. In today’s
technological world there really is no reason you can’t have a full understanding of:
IndustryParticipants
You need to know who your competition is in the market you are planning to enter.
There’s a huge difference between broadly describing who your competition would be
and actually knowing who they are. For example, let’s say you sell Widget A used on
Ford automobiles to improve gas mileage. A broad description of your competition
would be the auto industry, while a more specific description might be Ford parts dealers
including Company A, B, and C. This is very important to determining whether the
market in your area is already saturated or if there is room for more competition.
DistributionPatterns
There are many paths that products can follow from the supplier to the end user. Some
products are always sold to the consumer through retail stores, other products can be
ordered directly from the manufacture. Knowing the distribution pattern for your
© 2011 Apptivo Inc. All rights reserved.

2. product(s) is critical because if the product(s) is available through other channels cheaper
than you will be able to provide your business is compromised.
CompetitionandBuyingPatterns
It is critical to your success that you understand how customers choose one provider over
another when purchasing the product(s) you will offer. Is it based on price, support,
warranty, etc? Once you understand the buying patterns, you can decide if you can be
competitive.
AnalyzeMainCompetitors
Determine your main competitors and then analyze what their strengths and weaknesses
are. Consider everything – price, policies, brand awareness, distribution channels, etc.
Now you are ready to make the final decision as to whether you believe you can compete and be
profitable.
© 2011 Apptivo Inc. All rights reserved.