How to Write a Competitive Analysis for a Business Plan

The Competition Analysis can be a difficult and intimidating section of the business plan. In other section of your business plan, the focus was on what you knew best: your company and the customers you serve. Now you must focus on your competitors, on whom you have the least control and the least amount of ready information. This section forces you to fully understand your competition and come up with a plan to thrive in the marketplace.

This section has two major purposes: to help you make sure you understand the marketplace so you can position yourself for success, and to assure anyone who needs to make financial decisions about your company that you understand the marketplace and are working to position yourself for success.

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It’s likely that you have competitors–even if you think you don’t, there’s probably a company out there that either sells the same product you do, sells a viable replacement or will sell it in the future. Ignoring the fact that you have competition will drive a stake into the heart of your business.

In the Competition Analysis section of your business plan, you should focus on three areas that force you to take a good look at your competitive landscape:

  • Identify direct, indirect and future competitors.
  • Perform a SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis.
  • Write an analysis of your findings with insight into how your business will deal with competitors.

The first two parts of the analysis are mostly a research task. Your analysis is what you’ll include in your business plan.

Identify your Business Competition

Your first job is to identify your direct competition (companies that sell the same product you do), indirect competition (companies that sell a suitable replacement product) and future competition (companies you’re aware of that may expand to sell similar product in the future).

use the Internet to search for competitors by using search terms customers would use to look for your products. Create an exhaustive list of the competitors your search turns up. If it’s a retail business with a physical location, such as a hair salon, use a mapping application to search for specific geographic areas. Make a definitive list of all your competitors within a certain radius, then call research their websites or go to their locations to better understand their pricing and product strategies.

How to Perform a SWOT Analysis

A SWOT analysis is a valuable tool in business planning and the perfect way to compare yourself to your competitors. The analysis can be a time-consuming process, so limit your analysis to the top two or three direct competitors, one indirect and one future. You should repeat the process from time to time to make how your competition has changed.

Start by making a grid in a spreadsheet or on paper. Along the top, list your company and the others you want to analyze. Down the left-hand side, list important pieces of information you want to gather about each company—-name, owner, address, etc., and important aspects about products and services, customer service, target customer base, what gives them a competitive advantage, and financial aspects like pricing, annual sales and quality ratings. The more topics you can think of to compare, the better.

Finding this information will take time and leg work. Look for it on the companies’ websites, annual reports, consumer reports, customer reviews or by walking into the store and asking questions.

Once you have gathered all of this information into your grid, examine each company, including yours, and identify their strengths and weaknesses. Look for opportunities you can exploit, such as a company that provides a good product but poor service, and threats you must look out for such as a popular feature you are unable to offer.

How to Write the Competition Analysis Section

All of the information gathering is meant to gain insight into your business so you can leverage your strengths, improve on your weaknesses, take advantage of opportunities and mitigate threats for the best possible competitive edge.

Your reader really only wants to know the ‘so what?’ of your analysis: what is the end result? Are you in a good position in the market? How do you plan to improve?

The Competition Analysis section of your business plan needs to only be a few paragraphs. Start with an outline of the competitive environment, including who your competitors are, their control of the market and any other important details your reader needs to know.

Next, discuss your competitive advantage. You’ll be competing against established businesses, so show your reader how you’re positioning the company to compete against them. Don’t just regurgitate the data from your analysis. You should provide insight. If your industry is failing, explain why and how your company will be different. If the marketplace already seems flooded, show how that will not affect your sales.

Writing the Competition Analysis in a business plan can be intimidating. It’s meant to be an in-depth process that requires a lot of research and critical, impartial thinking on your part. The process of identifying your competition and performing a SWOT analysis is a valuable and essential exercise. Additionally, writing up your findings and including your expert insight will show your reader that you know where you stand in the marketplace and are well prepared to make your business successful.

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