The competitor analysis section is considered one of the most challenging sections to compile when writing a business plan because before you can analyze your competitors, you need to research them. Here’s how to write the competitor analysis section in your business plan.
First, identify your competitors
If you are planning to start a small business that will operate locally, you likely already know the businesses you will be competing against. But if not, you can easily find out by searching online for local businesses, checking the printed or electronic local phone directory, or even driving around your target market area.
You may also have non-local competitors that you need to be aware of. For example, if you sell office supplies, you may also have to compete with large retailers several hours away and companies that offer office supplies online. You want to make sure you identify all potential competitors at this stage.
Then find out about them
You need to know:
- The markets or market segments served by your competitors.
- The benefits offered by your competitors.
- Why customers purchase from them.
- As much information as possible about their products and/or services, pricing, and promotion.
Gathering information for competitor analysis
Visiting the physical store or website of the company is still the most obvious starting point – whether that’s to the physical store or the company’s website. Go there once or several times, and look around. Observe how customers are treated. Check prices.
You can also learn a lot about your competitors by talking to their customers – if you know who they are. Other good sources for live information about competitors include the company’s suppliers and company employees. They may be willing to talk to you, or they may not, but it’s good to seek them out and ask.
Follow trade shows that your competitors may attend. Companies are there to share information about their products or services and to sell; attending it and visiting their booths can be an excellent way to learn more about your competitors.
You’ll also want to look for publicly available information about your competitors. Press releases may contain information about the company you are investigating for competitive analysis. Press releases can be particularly helpful.
Once you have gathered information about your competitors, you are now ready to analyze it.
Analyzing the competition
Simply listing a bunch of information about your competitors in the competitor analysis section of your business plan misses the mark. It’s the analysis of the information that matters.
Examine the information you’ve collected about each of your competitors and ask yourself this question: How will you compete with that company?
For many small businesses, the key to competing successfully is identifying a gap in the market where they can seize a specific target market that meets its needs and has not been met. Is there a particular segment in the market that your competitors have overlooked? Is there a service that customers want or need that your competitor hasn’t provided?
The goal of the competitive analysis is to identify and expand your competitive advantage – the benefits your proposed business can provide to the customer that your competitor cannot or will not supply.
Writing the competitor analysis section
When writing your business plan, you will write the competitor analysis section in the form of several paragraphs.
The competitive landscape will be outlined in the first paragraph, where you will inform readers of the proposed business’s competitors and how much of the market they control, along with any other relevant details about the competition.
The second and subsequent paragraphs will clarify your competitive advantage and explain why and how you will be able to compete with those competitors and establish a successful business.
Remember; you don’t need to go into exhaustive detail here, but you do need to convince the reader of your business plan that you understand the competition and have a clear, actionable plan that will enable your new business to compete successfully.
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