Running a small business can be a tough task to handle. Gone are the days when new businesses have to worry about sales alone. Today, there are many factors to contend with including competitors. In order to grow your business, you must first understand your position when compared to the competition in the market.
Understanding how your competitors operate requires a lot of research and observation. More importantly, you have to learn how to use this information to better your business. This is what makes your business unique. It gives you an edge over other businesses.
The competitive analysis section is crucial to a business plan. It should be comprehensive and informative enough to convince your investors.
What If I Don’t Have Competitors
Before venturing into any business, you should know that you do have competition. Regardless of how unique the business, competition exists. Even if you don’t have competition today because the business is so new and innovative, it will most likely come - it’s only a matter of time. In this case, the competition section of your business plan will take into account the competitors likely to find their way into the market.
It’s unwise to suggest to your investor that your business has no competition. Don’t mention that in your formal plan or in your pitch. Many investors may conclude that you’ve not done enough research. So long as your business idea is good and profitable, there’s a competition.
If you think you don’t have a competition, go back to your business plan and critically review the problem you solve. How do people solve this problem before now? What kinds of business are likely to join the sector if you eventually build a market for it? That’s your competition.
Competitive Analysis Writing Tips
Just as the name implies, the competition section of your business plan analyses your competition. This will include the current competitors and potential competitors with a likelihood of entering your market. It helps you understand the strength and weakness of your competition. The information gathered will be used to your advantage. Perhaps, you may be thinking whether to hire a good detective to help with the task. That’s unnecessary. It’s high time you sharpened the detective skills inside of you. Conduct a thorough assessment of your current competition as well as potential competition regularly irrespective of the size of business.
The first step in writing a competitive analysis is research. Write down any facts and findings about your competitors. But first, it is important to know who your competitors are. Surf their website and social platforms. If possible, get your hands on any offline marketing materials they might have. These include flyers, posters, ads, etc.
Here are some useful tips to get started.
Who Are Your Competitors?
Identifying your competitors is one of the first things to do. Comb your local area for any business offering similar products and services. These are the businesses that cater to the same market. Once done, list them out.
It is recommended to go after businesses of similar sizes. For example, if you specialize in selling hair extensions, a big unisex salon usually isn’t your direct competitors even if they sell hair extension to their customers. Instead, look for businesses of the same size to yours selling hair extension products and other similar items.
The next step is writing a brief overview of the listed competitors and why you think they are your main competition. To write a brief description about each competitor, you need to know about them. If you know the business well enough, then you can start writing. If otherwise, you have to conduct thorough research about the competition.
Odds are you’ve made contact with one or more of the competitors either as a customer or at a trade show. You need to state how much information you have about your competitors in your competition section.
Who Are Their Customers?
Next on the list is identifying their target audience. One way to get this information is by visiting their website, check their social platforms, read through their marketing materials, etc. If you can get your hands on any of these materials, finding out their target audience is easy.
So how do you identify your competitor’s customer? Here are some useful tips to follow
- Check their age range
- Location of potential clients
- What they do
- Pricing information
- What’s their common goal?
List Their Pricing
Another important aspect of the competition analysis section of a business plan is that it includes how competitors price their products and services. This information should also include shipping fees, if applicable. Now, compare the prices with yours. This way, you can make adjustments to your pricing if necessary.
Research Their Promotional Strategy
Of course, you will be operating your business independently without any direct interference from your competitors. However, promotion and adverts are one area where you’ll be contending with your competitors.
As a small business, you might not be financially capable to carry out a bigger marketing plan, but marketing plays a significant role in the success of every business. This is one of the driving factors that attract more customers to your business. The more familiar they get with your message, the more likely they are to patronize your business.
No doubt, you have your marketing plan in place, but it makes more sense to learn more about your competitors. Find out how they market their business. Here are some things to take note of
- Marketing Materials. Don’t just read through the content alone. Instead, check the quality of materials used? Are they glossy or just ordinary print paper? Do they use high-quality ink and paper? etc
- Social Channels. Research different social media platforms each of your competitors have built a presence. How many followers do they have? Also, check their post for the number of shares and comments they get
- On visiting your competitor’s website, what’s the first thing that you see? Don’t forget to check the design as well? What is the focus keyword on their website? Check to see if the site rank high on search engine result - are they on the first pages?
- If they have a blog, how often is it updated? Does each blog post have comments or social media shares?
- Have you seen your competitor's advert placement over the internet, in yellow pages, or in local newspapers?
- Do your competitors organize periodic events or promos to draw more clients and increase customer base.
What Makes Your Competitors Unique
Next on the list is identifying their competitive advantage. In this case, you’re looking for what makes them stand out from the sea of businesses in your niche. What services make each business unique? Why would some customers choose to patronize them even though you offer similar product or services?
One way to outshine your competitors is by providing a better service. Thoroughly research your competitors to know what your own competitive advantage will be. This will help you
Know Your Competitors
Once you’ve completed the steps listed above, you will have a better understanding of your competitors. Don’t just keep this information on your desk. Analyze them and use them to your advantage.
Given the information you have about your competitors, modify your business plan to include any new idea you might have to stand out. If it requires reviewing your pricing structure, don’t hesitate. Or perhaps, you will focus on the marketing platforms your competitors didn’t give a second thought to. Try to identify your own competitive advantage
Know your business needs. The competitive analysis section of your business plan will serve as a guide in your decision-making process.
Always Remember: You Do Have Competition
If you claim your business have no competition, then it has to meet two conditions.
The first is that your business is innovative and new that it’s hard for any business to venture in.
The second is that there’s a flaw other people see but you’re blinded by other aspects of the business. Hence, you can’t see it. In other words, it’s not a good business that others can duplicate.
Either way, there’s always competition. In the first instance, your competition is still developing, waiting for maturity period before entering into the market you created. Stay prepared as it will eventually happen.
In the second case, review the business.