A client has taken her business plan to a bank and she was asked, "How profitable are other similar businesses in this area?" This is an important question for a bank to ask, and you should have the answer in your business plan. I have been doing some research on this question and I found a couple sources that might help her, and you, if you need to present industry data to a bank for a start-up loan or other financing.
Prime Industry Reports
I found Prime Industry Reports by looking through Experian's website. This company provides information on most U.S. industries (based on NAICS classification), at the local, state, and national levels. The information they provide includes:
- The number of businesses in the area and their average sales
- A projected annual growth rate for this industry
- Average balance sheet and income statement information for the past 5 years, including operating profit
- Financial ratios
BizStats provides a similar service. The reports are broken down by type of legal entity (sole proprietorship, corporation, LLC, etc.). A basic industry report at no cost will give you one year (2005) of data on Return on Sales, Return on Gross Profit, and Net Cash Turnover. More detailed reports are available for a fee.
BizMiner is a service similar to the other two described above. This service has a free report for each industry for your review. The more comprehensive and probably the more up-to-date report on an industry is $69. I didn't see local statistics for either BizMiner or BizStats.
Most industries have a national trade association which collects and publishes information on industry-wide profitability, sales, size, and other financial information. The American Society of Association Executives has a listing of associations - state, national, and international - that might help you find an association for your profession.
Including Information in Your Business Plan
To incorporate this information in your business plan, create an Industry Profile section and discuss the relevant and most significant statistics. Don't overwhelm your read with numbers, but select the data that is most important, like
- Average annual sales
- Operating profits or before-tax profits
- Average return on sales or return on investment for owners
- Projected annual industry growth