Your Business Plan Part 7: Competitor Analysis
Your Business Plan Part 7: Competitor Analysis
Your business plan will continue to evolve as your business grows, and by taking a hands-on approach to the creation and development of this document, you’ll feel comfortable updating and revising your business plan as often as required. As an added bonus, a business plan that’s easy to comprehend will benefit your investors and senior team members in future, guiding them across the business in its past, present and future. Today we look at the 7th section of your business plan, your competitor analysis (also known as a competitive analysis) which takes into consideration the other ‘players’ in your market, looking at the strengths and weaknesses of your competitors and sharing how you plan to keep your competitive edge over them.
Before diving into this section, take the time to review our previous posts on the market research and market analysis sections of your business plan – these will provide you with the foundation to select your key competitors to hone in on for your competitor analysis.
For successful competitor analysis, you want to select the right competitors to analyse, understand which strengths and weaknesses of these competitor businesses are worth learning about, know where and how to find relevant data, and most importantly, understand how to make use of these insights once you have them.
Main Competitor Analysis
To begin this section of your business plan, it’s recommended to first review your main competitor – this will be a business that is targeting the same customer base as you, offering the same (or similar) product or service, or a blend of the two. Once you’ve selected this business, it’s time to deep-dive into more comprehensive research which you’ll then detail for your business plan.
As a first step, it’s worthwhile purchasing a product or service from your competitor (or engage a friend or network member to do so on your behalf) – you’ll gain insights into the customer experience end-to-end, and understand in detail their customer processes and interactions, which is essential to be familiar with in order to properly assess where you sit in comparison.
Next, it’s time to layout your main competitor by their strengths and weaknesses (a table format is recommended for ease of reading), highlighting all of the “pros and cons” of the business.
For example, you might find that your main competitor delivers speedy customer service, with a great follow-up email and engaging customer newsletters. In contrast, you may have spotted weaknesses with their lack of product range or staff knowledge of product trends and options.
Look to include a whole range of strengths and weaknesses to ensure your analysis is thorough – these may include their pricing, location, online sales options, website experience, brand ambassadors or latest marketing strategy. Once you have comprehensively detailed a range of their strengths and weaknesses, address how you plan to combat their strengths and target their weaknesses within your own business.
To be successful, you want to remain one (or even two!) steps ahead of your main competitor, and so it is essential to drill down on the strengths of your business, or upcoming plans to adjust and stay agile in the market. Knowing what your competitors are focused on will allow you to differentiate and catch your customer’s attention – this may require accommodations within your financial plan and budgeting. For example, your website may be in need of a revamp, especially if your main competitor is leading in online sales and presence, and you’ll need to allocate funds to this area to ensure you remain competitive.
Second Key Competitor
Following your main competitor analysis, you’ll want to replicate these steps for your second key competitor – another business that you have identified through your research as a threat within the market. Share their weaknesses and strengths and again, summarise how you plan to address these points within your own business – there is often inspiration to be found by looking closely at your competitors, making you aware of areas for improvement as well as your own unique strengths that stand out during this process of comparison.
Your competitor analysis can be as extensive as you wish to make it – with two key competitor analyses completed, consider adding tertiary competitors in as well. Tertiary competitors may be businesses who sell a product or service that is similar but not directly comparable to your own. For example, they may offer a significantly cheaper alternative, or be targeting a vastly different clientele.
Now that your competitor analysis is complete, you will be moving on from the market and competitor focus, and next time we will be sharing how to build out your financial plan within your business plan document.