Industry Analysis in a Business Plan: Steps + Example

Though the importance of industry analysis is quite a well-known fact in a business plan, what’s less obvious is what it’s actually supposed to do, and that’s where most people get stuck.

The questions come fast. Isn’t this just the market analysis under a different name? What do you research for it? What has to be included, and how long should it run, a paragraph or several pages? And once you find statistics, which ones actually belong, and how many are enough?

All of it comes down to one purpose. The section needs to prove that the sector you’re entering can support a business like yours, and that you understand what you’re getting into.

Let me show you how to research and write the section, so it argues for your business instead of describing your industry.

First, though, let’s sort out industry and market analysis, because those two get mixed up constantly.

Industry analysis vs. market analysis

Industry analysis looks at the broader sector you’re entering: its size, growth, major players, trends, and risks. Market analysis focuses on the customers you plan to serve, the demand they represent, and their buying behavior.

You need both. Industry analysis explains the wider conditions affecting the business, while market analysis shows that a specific group of customers is likely to buy from it. If you want a further breakdown, you can read our blog on industry analysis vs market analysis.

Before I guide how to write the industry analysis section, let’s just take a look at what are the things you need to have handy.

What to include in an industry analysis section?

An industry analysis is the part of your business plan that examines the sector you’re entering, so anyone reading it can see it supports a business like yours and that you understand what you’re getting into.

For most business plans, the section should cover six main areas:

Let’s pile them up and begin writing the industry analysis for your business plan.

How to write an industry analysis for your business plan?

These six steps run in the order you’d actually build the section, from naming your industry to explaining what your research means for the business. Each step produces a piece you can defend, and the last one pulls them together into a case for your business.

Define the relevant industry and scope

Your opening sentence has to name your industry, which forces the decision most founders tend to ignore: which one, exactly?

A smoothie shop could honestly fall under several broad categories, including juice and smoothie bars, food and beverage, quick-service restaurants, health and wellness industry. Each carries a different market size, growth rate, and competitor set.

Pick the narrowest industry that still describes how you make money. For the smoothie shop, that’s juice and smoothie bars, not food service at large. Narrow is more credible, easier to research, and keeps every downstream number honest.

Scope is more than the name, though. Three things pin it down:

• The industry or subindustry
• Your business model
• The geography you operate in

A single-location shop and a national franchise may have the same industry but very different analyses.

Use the NAICS code system to lock it in. Every U.S. industry has an official code that fixes a clear boundary and unlocks the government data filed under it. Search yours, and if your business straddles two codes, pick the one matching your main revenue source.

That gives you your first sentence: “Sunrise Smoothie operates in the juice and smoothie bar industry (NAICS 722515), a single-location shop serving Eugene, Oregon.” Everything else hangs off it.

Research the industry data using credible sources

Once the scope is clear, gather three types of information:

• Market size: What the industry is worth today, in dollars.
• Growth rate: How fast it’s expanding, as an annual percentage or CAGR.
• Outlook: Where it’s projected to go over three to five years.

Where you look depends on what you’re after. For size and growth, start with the government every time. It’s free, and nobody argues with a Census figure.

Here’s the rundown in short:

For a wider list, here’s a full rundown of free and paid sources of industry reports.

A couple of things I’d tell anyone starting. Don’t pull all four numbers from one place; a mix looks like you actually did the work. And always check when the number was published. Anything older than two or three years doesn’t carry much weight.

You’ll probably hit one of these snags, so here’s how I’d handle each:

• Is the report you want behind a paywall? Skip it. Those paid tools mostly repackage the same government data you can grab yourself, and their numbers aren’t verifiable anyway.
• Two sources giving you different figures? They’re measuring different things, so don’t split the difference. Just pick the one that fits your business and say where it’s from.
• Can’t find anything on your specific niche? Back up to the closest industry that is tracked, then narrow down with a bit of reasoning, and be honest that it’s an estimate.
• If all your data is national but you’re opening one location, that’s completely fine. Industry analysis is supposed to be national in scope. Your local demand story goes in the market analysis.

By the end, you should have three numbers written on a scratchpad, each with its source noted next to it. That’s the raw material. The next step turns them into sentences.

Evaluate the industry’s size, growth, and outlook

A number on its own is useless in a plan. “The industry’s growing 5.3% a year” is fine, but so what? Everyone in your industry has that stat. What the reader wants is what it means for you. So that’s the move for every number: write it down, then finish the thought. Watch what it does:

• Just a stat: “The industry’s growing 5.3% a year.”
• Finished: “It’s growing 5.3% a year, driven by buyers under 35, exactly who my pricing is built for.”

That finished thought should land on one of five things:

• Demand
• Pricing
• Competition
• Costs
• Forecast

If it can’t, drop the stat.

Growth isn’t proof you’ll succeed. Fast-growing industries pull in competitors and squeeze margins. Slow ones can be comfortable if you’re well positioned. So don’t write your growth rate like it wins the argument. Explain both the opportunity it creates and any additional pressure or risk it introduces.

Your outlook number, however, should tie it to what your financials assume. “Steady mid-single-digit growth is enough to hit my revenue targets” tells the reader your plan doesn’t hinge on a boom.

Once you do this exercise for each number, your size-and-growth section is basically written.

Identify the trends and factors shaping the industry

The trade association reports from step 2 are your source here. They lay out the current shifts in the industry, so pull the ones they highlight, and you’ll usually end up with a rough list of eight or ten.

Now cut it down to three to five. There’s a simple test for what stays: Can the trend actually move something in your business?

“Something” being one of these:

• Customer demand
• Pricing
• Operating costs
• Technology or distribution
• Labor
• Buying behavior

If you can’t point to which one a trend affects, leave it out.

Then, for the ones that survive, take each one step further, to what it means for you. “Demand is shifting toward functional ingredients” is a fact anyone could write. “Demand is shifting toward functional ingredients, which is what lets me charge $8 to $15 instead of competing on price” is yours.

By the end you’ll have three to five trends, and each one should connect to something concrete in your plan, a pricing choice, a cost, a customer decision.

Assess competition, entry barriers, and industry risks

Your job here is to answer whether there is room for a business like yours to get in and survive. Don’t discuss competitors or their prices; only judge the shape of the field.

There are three things worth checking.

Who’s already in the market?

A field full of small players means there’s room for you, but it also means a new competitor can copy you just as easily, so you’ll need something that keeps customers coming back.

A field run by a few big companies is harder to break into, so your way in is the corner of the market they ignore.

How hard is it to open a business like yours?

This one cuts both ways. If anyone can start tomorrow with little money or expertise, expect competition to show up fast.

But if there are real barriers like licenses, expensive equipment, specialized know-how, those same barriers work in your favour once you’re established, because they slow the next person down too.

How much power do customers and suppliers have?

If customers can easily switch to a substitute, that limits what you can charge. And if a few suppliers control what you need to buy, they can squeeze your margins. Either way, your pricing and financials need to account for it.

Once you’ve worked through those, write what all of it means for how you compete. A fragmented field usually means winning locally beats trying to outspend anyone.

A field run by giants means you go after the niche they ignore. Either way, you finish on your move. If you want to go further and compare your own numbers against industry averages, that’s a separate exercise called industry benchmarking.

Do the same with risks. Name the two or three that could genuinely hurt you, and be specific. “Fruit prices jump when the harvest is bad” is a real risk. “Increased competition” is the kind of filler everyone writes. Naming the real one shows you saw it coming.

Those three checks are a simpler version of Porter’s Five Forces, a framework for sizing up how competitive an industry is. It looks at five pressures:

• New competitors entering
• Suppliers raising prices
• Customers pushing prices down
• Substitute products
• Rivalry among the businesses already there

When you run your industry through those five, you’ll usually surface a threat you’d glossed over. You don’t need to put the framework in your plan, but it’s a helpful checklist when you’re deciding what to write here.

Explain what the findings mean for your business

Take every finding you’ve gathered so far and run it through two questions. What does this mean for my business? And what am I doing about it? That’s the whole step. You’re turning a list of industry facts into a list of decisions.

Once every finding has those two columns filled in, you’ve basically written this section. Pull it together into a short paragraph, working off that third column. Here’s how it reads for the smoothie shop.

The juice and smoothie bar industry is growing steadily at 5.3% a year, and that growth is concentrated in health-focused adults under 35. Sunrise Smoothie’s pricing and menu are built for exactly that buyer. The industry’s biggest risk, low barriers to entry, is real, which is why the plan anchors on a loyalty program and campus partnerships that a new competitor can’t copy overnight.

Notice every line traces back to something you found earlier. The growth, the customer, the risk, the response, all of it.

One last check before you move on. Whoever reads this might wonder whether a bigger player could just do the same thing. Answer that before they finish the thought; that’s why the example lands on the loyalty program, the thing a newcomer can’t replicate right away.

Here’s a quick way to check whether your paragraph actually says something. Swap your business name for a competitor’s down the street. If the paragraph still reads as true, it’s not a position. A real position should only be true for your business. If a rival’s name fits just as well, go back and add what actually sets you apart.

Once you’ve worked through the six steps, put the pieces in the order in which a reader’s questions come in:

Industry and scope → size and outlook → trends → competition and rules → risks → why your business fits.

For most plans, that’s 500 to 800 words. A complex or heavily regulated industry might need more.

Industry analysis example in a business plan

Here’s a finished industry analysis for Sunrise Smoothie, a single-location juice and smoothie bar opening in Eugene, Oregon. It follows the same six parts you just worked through.

One quick note on the numbers. The market size below is $4.5 billion, the figure for juice and smoothie bars, not the $16-plus billion “smoothies market” you’ll also see when you search. The larger number counts packaged smoothies sold in grocery stores, which is a different business. Picking the narrower figure is step 1 in action.

Every number in the prose matches the table, and every paragraph ends on a decision rather than a fact. The fragmentation becomes the opening. The low-barriers risk is answered in the closing paragraph.

Notice what isn’t here: foot traffic, local demographics, and the specific competitors down the street. That’s market and competitive analysis, and it belongs in those sections.

The bottom line

If there’s one idea to carry out of all this, it’s that an industry analysis is judged on whether the data connects to your business. A growth rate on its own proves nothing. The same growth rate tied to your pricing, or your risks, or your projections shows you understand what you’re getting into, and that’s what a reader is looking for.

Everything in this guide serves that. Define your industry narrowly so the numbers stay relevant. Source them carefully so they hold up. Follow each one through to what it means for your plan. Once you get those three right, you’ll have a section that argues for your business.

If the research is the part slowing you down, Upmetrics’ AI Research Assistant can help. You tell it your industry and location, and it gathers the market size, growth rates, and trends for you, with sources attached, and drops them straight into your plan. Just review the sources before using them.

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