What is industry and how to define your company

by Ralf Jennings


When someone decides to start a business, the first choice you need to take is as to its field of activity. Sometimes this definition happens even before the idea of undertaking. You like a movement, have some technical knowledge about it, and, from that, see the excellent market potential, motivating the opening of the business.

Choosing the industry

Any for-profit business is created to serve a consumer market, performing a specific task, and charging for it. A company’s business is specifying what it does to generate value for its customers. Within the industry, commerce, and services, there are several areas of activity.

In industry, for example, your business may be a printing shop, a furniture factory, or a clothing factory. Industries are the companies that transform raw material into a commodity. The production will be defined by the type of merchandise the company produces.

Commerce companies directly serve the final consumer and usually resell items purchased from suppliers. Possible branches are clothing stores, pharmacies, supermarkets, and health food stores.

In services, you do not sell products, but provide a useful activity to the customer. Taxi, cinema, laundry, language courses, accounting office, and dentist’s office, are examples of businesses whose value proposition is the provision of a service.

How to define

Have you tired of the life of an employee and want to undertake, but are full of doubts and do not know in which area to invest? Don’t worry: this is a common dilemma. It is better to have this type of fear than to be overconfident, which can mask the risks that will undoubtedly arise with the venture.

We can say that you need to take six factors into account when choosing your industry as an entrepreneur. See what they are:

Personal preference

Anticipating what your satisfaction will be working in the activity you intend to engage in is very important. It is prevalent to hear stories of entrepreneurs who did not like what they were doing, who opened their company only because they identified an excellent business opportunity. Almost always, the end of the story is not a happy one.

It is straightforward, enjoying what you do, the activity is performed with much more dedication. Besides, learning more about the subject will be, before an obligation, a hobby.

But don’t go thinking that everything is flowers. You need to be discerning that running a business is not just fun – there are many bureaucratic management tasks. Be careful not to be negligent with them and pay attention only to those you like best.


No mystery here. How could you succeed in an activity without having an idea of how it works? The level of knowledge required varies. For example, in areas such as health and engineering, professionals hired for the main functions must have a college degree. The company partner does not need to, but it is good to understand the subject.

The good news is that specific technical knowledge is more easily acquired than the general skills and characteristics that a good leader needs to have – emotional intelligence. Depending on the area, you can find everything you need on the internet – as long as you have the discipline to delve deeper into the subject.

Consumer audience

As stated at the beginning of the text, a company is opened to serve a consumer market, that is, to meet the desires and needs of individual people. If they don’t exist, there is no reason for the business to be created, is there?

So, before investing your money, conduct market research to find out if there is an audience for your idea. The answer may depend on the precise location. An executive restaurant, for example, may find little public in a region, but many potential customers in the neighboring neighborhood.


The market study must also include the analysis of competition. It is not just about knowing how many companies in the same industry you are going to compete in the market for, but about knowing them in detail, to find out what are the gaps, you can explore to differentiate yourself.

If you do not identify them, it will be more challenging to compete with established names, which increases the risk of the venture.


How much money would you need to invest in starting a business in a particular industry? Do you have that money? If the answer is no, it would need to find investors or take out a bank loan, which is a risky idea, as the company would already start the operation with a debt to be paid and interest rolling over.


What are the prospects for a given activity for the next five or ten years? Don’t be skeptical about advancing new business models and new technologies. Imagine the likelihood of a disruptive event shaking the market. A basic example: it made more sense to open a video store 20 years ago than today. Keep this in mind, and always look ahead.

Find the balance

Too many factors in evaluating. To decide, you need to find a balance between them. If a particular activity requires a lot of money, for example, market research and the future outlook should give you a lot of guarantees that you will return. Otherwise, you will be taking many risks.

If the area is not your greatest passion, having good knowledge helps, because you will not face even more motivation problems to learn the trade. If the audience is not broad, competition may be low and, by captivating the few consumers in the niche, you can succeed.

Anyway, the relationships between one factor and another are multiple, and you need to understand and balance them when choosing the industry of your company. From this definition, you will register the company in the corresponding CNAE (National Classification of Economic Activities).

In this and the previous stages of your decision, it is essential to have the assistance of an accountant. It will answer questions about taxes and help you understand the challenges of each activity. This type of professional is very familiar with fiscal and financial issues. So it is a meaningful relationship to start early, especially if you want to grow your business.

Ralf Jennings

I have been covering reports on everything relating to American politics and economic trends in the U.S. since 1999. After my graduation from college, I began to work as a part-time writer for a local magazine and this experience helped me build my writing and reporting skills. I eventually got aRead more...