Business Plans Should Include The Economic And Industry Environment
Your company does not exist in a vacuum
Your company does not exist in a vacuum. When developing your business plan it's necessary to incorporate the industry and the economic environment. The purpose of gathering information about your industry and the international, national, or local economy is so that you may develop reasonable ballpark projections for the short and long range. Knowing how your company's performance reacts to an up tick or downtrend gives you time to adjust your operating procedures.The objective of the economic analysis is to find economic variables that relate to your business. Forecasts of these economic variables can then serve as the basis for forecasting revenues or income for your company.
Economic Environment: An overview of the major economic forces and how they affect your firm, its products and its customers. Answering the following questions will give you a start on seeing how the economy affects your business.
How will the performance of the national or local economy affect the operating results of your business in the upcoming year? What economic variables, such as inflation, consumer spending, Gross National Product, etc. affect your business and your customers? What's the outlook for these variables? Is your business only affected by regional economics?
If the economy's performance differs from your expectations, either positively or negatively, what would be the impact on your company?
Economic forecasting is extremely difficult, and each year the "experts" disagree widely about what they expect the economy to do. The key thing to remember is that no one really knows for certain how good, or how bad, the economic situation will be in the future. You need to be aware of economic trends, but you shouldn't depend on any one forecast coming true.
Industry Environment: a summary of your industry's performance and outlook. The outlook for your industry is just as important as the economic outlook, perhaps more important. Compare your company's performance with that of the industry as a whole. Is your business doing better or worse? You may have to break the industry into subsets. For example: weddings are a huge industry and wedding flowers a smaller subset, silk wedding flowers even smaller.
Industries change. The Internet used to be static, but with interactive social networking sites, blogs and such, it has become much more energetic. It has also become much more commonplace with older users. Your company needs to change with the industry.
Considering the world around you and how it impacts your business is important to include when considering how to write a business plan.
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