Every business plan should include a comprehensive overview of your business’ marketplace competition. Competition means there is a market for your business and, despite what some may argue, it’s healthy to have one or more competitors. Any business that provides a similar service or product in the same region may be viewed as a primary or secondary competitor. Your business needs to highlight and build upon the weaknesses of its competitors to increase its profitability and market share. The following provides a step-by-step process in creating your competitive analysis.
Identifying competitors: One easy way to locate competitors is to use a Google or Yahoo! map. Enter in your business’ proposed or existing address and search for nearby businesses of a similar category. For example, if you’re opening a pizzeria, you can search “pizza shops” or “pizzerias” in the same zip code or city. Through this easy process, you’ve identified potential competitors. If your business operates in a niche industry, the best way to identify competitors is to leverage established contacts and web research.
Understanding your competition: Now that you have identified your top competitors (aim to analyze at least two direct competitors), it is necessary to learn everything about these companies. What do I mean? Visit their website; call the business directly to learn more about the way they operate or what they sell; physically go to the competitor’s place of business; and research customer reviews. The latter step can be implemented by simply typing in “customer reviews of XXX” in your online search bar. Also, these reviews usually are posted on websites such as Yelp.com and CitySearch.com.
Pointing out their weaknesses and strengths (eloquently): Lesson to be learned – no bashing on competitors; it is unprofessional and makes your business look worse. When I say bashing, I mean using expressions such as “they suck” or “they have no customer assistance.” Every company has some element of customer service, so a statement like that is literally untrue. Now, the competitor may lack quality customer service, and such an observation would be a much more acceptable approach in pointing out a weakness in a business. When I am writing a competitive analysis, I always include one to two strengths and two to three weaknesses of each competitor.
Your competitive advantages: Ah, finally, we’ve reached the point of emphasizing your strengths. Truly use this section to emphasize why you’re a better business in a bulleted format (preferred) and include a few statements in paragraph form about how you intend to surpass your competition. Examples include greater industry knowledge, lower prices, friendlier and more attentive staff, larger inventory of products, and so forth. Your best bet is to underscore your own unique competitive edge that cannot be argued. Voila, you’ve completed your competitive analysis.
This is a Guest Post by Ellen Arndt, Director of Marketing and Research Writing for EPIC Business Planning.