While there are certain parts of creating a business plan that can feel like a struggle, there are other parts that I personally find downright fun to work on — like the business plan competitive analysis.
I enjoy working on this section so much because it’s where I see my clients feel truly empowered. They can see their competitor’s weaknesses, and begin to paint a full picture of what they’re up against.
What can make the business plan competitive analysis a bit of a challenge is fighting against our natural biases. Of course you want to focus on what you have that they don’t! However, a complete analysis isn’t about simply highlighting all the “bad” qualities your competitor has.
Where to Begin
The focus of your business plan competitive analysis should be providing an overview of the state of your market and who the key players are. Here you’ll want to illustrate any gaps in the market that your business will fill. Plus, you should highlight what’s working well within the market and how you plan to leverage those opportunities.
It should also include an objective analysis on the good, bad and ugly with your competitors. You’re not trying to skew the analysis to make yourself look better than the other businesses, but instead you’re using this as a way to demonstrate how you can address any gaps.
The goal is to showcase what makes your business unique in contrast to your competition while demonstrating how you’ll differentiate your business in the market.
Investors look at the competitive analysis section to see what the market demand is for your business idea, and want to see that the market actually has space for another business.
Bankers are more concerned about what currently exists in the market, and how that competition will potentially impact your business’ ability to be successful. They want to know what your competitors are missing and what you could capitalize on to build your business.
Asking the Right Questions
To get started on your business plan competitive analysis, you need to start by trying to answer a few key questions about your competition:
- What are they doing?
- How are they doing it?
- What’s working for them?
- What isn’t working for them?
One of the biggest mistakes people make in this section is basing it on their assumptions. They include what they *think* they know, instead of relying on actual facts from their research. This approach can be detrimental as it can lead to underestimating your competition and not adequately planning for the realities of your market.
If you’re in a position where your business idea is extremely niche and there’s not really anyone else doing exactly the same thing, you’ll still need to make parallels and connections to similar businesses. You can be honest that there isn’t an exact match for your business idea while still showing you’ve done your due diligence to find other business models that will operate like yours.
Organizing Your Data
Part of what makes for a compelling competitive analysis is having well-organized data. Using tables can be an excellent way to make an impact with your research. Be sure to include everything from the competitions’ products and services, customer reviews, or customer return policies as reference points for how you can create an outstanding customer experience with your new business.
While it’s often very easy to identify your competitors, now’s the time to stretch yourself and widen the circle. Think beyond who the obvious competition is, and try to add another two or three to your list. Spend time researching them and looking at how they compare against the other competition you’ve already analyzed — everything from their logo to brand colors to pricing structure should be considered.
Once you have your comprehensive list of competitors along with all of your research, I suggest drafting a few sentences for each one that provides brief insight into their place in the market. Here you’ll want to include: what they do best and where they could potentially improve.
I’m a big fan of getting feedback from an outside source once you’ve put together your competitor information. You want someone to look at the analysis objectively to ensure it’s both complete and easy to understand. You don’t want this section to end up being a novel about how your competition stinks and your business idea is so much better. Ask the people reviewing to confirm that your business plan competitive analysis is fair and balanced.
Keeping Your Analysis Up to Date
Once you’ve finished your business plan competitive analysis, it’s important to revisit it regularly as part of keeping your business plan up to date. As your business moves ahead, you’ll want to include any relevant business activities and make updates to the competitor table as things evolve.
Check out my new book How to Write an Exceptional Business Plan HERE for more details on completing a business plan competitive analysis, including how to effectively research and other helpful tips!