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Learn2 Write a Business Plan (continued)
Step 5: Analyze the company and industry

Your business plan needs to include a company/product analysis, a risk analysis, and an industry analysis. Here's where you'll display your knowledge of your venture, the risks involved, and the industry.

Company/product analysis. First, describe what exactly your company is going to sell, and explain why you think people are going to buy it. Is your product superior in quality? Is it significantly cheaper? Does it come in a full-service package? Is it new or unique?

Now explain why your company is especially suited to create and market this product or service. Explain your overall strategy, as well as the way your company will be organized. Is it going to be a partnership, an LLC, a privately held corporation, or something else?

Industry analysis. Once you've established your overall strategy, you have to provide evidence that no one else is doing the same thing. You need to show your thorough understanding of the industry as a whole, as well as your company's special niche. Be sure to answer the following questions:

What is the size of the entire industry?

What forces are affecting the industry now or will affect it in the future?

Who are your closest competitors, and how do you differ from them?

Can competitors from another industry provide substitute products?
Risk analysis. Success in business is as much about avoiding problems as creating solutions. In addition to the other sections, many business plans include a risk analysis section to show investors the potential vulnerabilities of an enterprise. Having a lawyer-approved list of risks can also protect you from potential liabilities, as investors may have the right to sue if they prove they weren't informed of potential problems.

As you prepare this section, contemplate all the potential pitfalls and uncertainties that your business faces, including those things you may not be able to control. Basically, you want to list the potential problems and follow each with a paragraph of explanation. For example:

Will you be in trouble if you lose key personnel?

Could competitors prevent you from successfully entering the market (for example, by temporarily lowering prices, making distribution difficult, and so forth)?

Could new government regulations adversely affect your business?

Could new technology suddenly make your product obsolete?

Do you face any potential production or delivery delays due to technological failures or shortages of materials?

What would happen if clients or suppliers withdrew from business agreements?

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Step 1: Understand your audience
Step 2: Prepare to research and write
Step 3: Outline the essentials
Step 4: Detail the investment opportunity
Step 5: Analyze the company and industry
Step 6: Address the market
Step 7: Explain how your business will run
Step 8: Introduce the management team
Step 9: Prepare a financial plan
Step 10: Provide source materials
Step 11: Avoid common pitfalls
Step 12: Proofread your work