First, Find Out Who Your Competitors Are
If you’re planning to start a small business that’s going to operate locally, chances are you already know which businesses you’re going to be competing with. But if not, you can easily find out by doing an internet search for local businesses, looking in the online or printed local phone book, or even driving around the target market area. Your local business may also have non-local competitors that you need to be aware of. If you’re selling office supplies, for instance, you may also have to compete with big-box retailers within a driving distance of several hours and companies that offer office supplies online. You want to make sure that you identify all your possible competitors at this stage.
Then Find Out About Them
You need to know:
what markets or market segments your competitors serve;what benefits your competitors offer;why customers buy from them;as much as possible about their products and/or services, pricing, and promotion.
Gathering Information for Your Competitor Analysis
A visit is still the most obvious starting point - either to the brick and mortar store or to the company’s website. Go there, once or several times, and look around. Watch how customers are treated. Check out the prices. You can also learn a fair bit about your competitors from talking to their customers and/or clients - if you know who they are. Other good “live” sources of information about competitors include a company’s vendors or suppliers and a company’s employees. They may or may not be willing to talk to you, but it’s worth seeking them out and asking. And watch for trade shows that your competitors may be attending. Businesses are there to disseminate information about and sell their products or services; attending and visiting their booths can be an excellent way to find out about your competition. You’ll also want to search for the publicly available information about your competitors. Online publications, newspapers, and magazines may all have information about the company you’re investigating for your competitive analysis. Press releases may be particularly useful. Once you’ve compiled the information about your competitors, you’re ready to analyze it.
Analyzing the Competition
Just listing a bunch of information about your competition in the competitor analysis section of the business plan misses the point. It’s the analysis of the information that’s important. Study the information you’ve gathered about each of your competitors and ask yourself this question: How are you going to compete with that company? For many small businesses, the key to competing successfully is to identify a market niche where they can capture a specific target market whose needs are not being met.
Is there a particular segment of the market that your competition has overlooked?Is there a service that customers or clients want that your competitor does not supply?
The goal of your competitor analysis is to identify and expand upon your competitive advantage - the benefits that your proposed business can offer the customer or client that your competition can’t or won’t supply.
Writing the Competitor Analysis Section
When you’re writing the business plan, you’ll write the competitor analysis section in the form of several paragraphs. The first paragraph will outline the competitive environment, telling your readers who your proposed business’s competitors are, how much of the market they control and any other relevant details about the competition. The second and following paragraphs will detail your competitive advantage, explaining why and how your company will be able to compete with these competitors and establish yourself as a successful business. Remember; you don’t have to go into exhaustive detail here, but you do need to persuade the reader of your business plan that you are knowledgeable about the competition and that you have a clear, definitive plan that will enable your new business to successfully compete.
