How to Write Your First Competitive Analysis

by Townes Haas
9/19/2014 9:37:55 AM

Researching and Writing a Competitive Analysis for Your Business Plan


A business plan should include a thorough and well-laid out plan for your new business, including company description, executive summary and strategy and implementation. One of the essential sections of a business plan is a competitive analysis. A thorough competitive analysis demonstrates to investors that your startup has researched and understands the competition.

Purpose of the Competitive Analysis

The competitive analysis helps small businesses determine the strengths and weaknesses of more established competition. Small businesses have different options when it comes to dealing with competition: compete with them directly or recognize your niche where the competition is either weak or not competing at all.

The competitive analysis will help your small business determine how it can differentiate itself from the competition and where it should compete.

Researching Competitors

Start by doing some research to determine who should be considered competitors. Research other companies in the market that are selling the same types of products and services as your business.

  • Major competitors: Businesses that have been established and successful in the space, and who are probably well-known names to consumers.
  • Minor competitors: This includes companies that may not be as well known and those that may indirectly compete with your business. For example, a company like a local Ace store sells a lot of different products. They may on occasion even sell a similar product to yours, and when they do, they can carry and move a lot it.
  • New competition: Just because a company hasn’t launched doesn’t mean that it won’t become a competitor once it does. Research companies that are getting ready to enter the space.

There are numerous resources to utilize when researching potential competitors; here are just a few:

  • Business directories like Hoover.com
  • Annual reports
  • Websites
  • Articles/press releases
  • Webinars/seminars
  • Product brochures
  • Events/trade shows/conferences (especially good for finding businesses getting ready to launch)

What to Include in the Competitive Analysis

The competitive analysis should be broken up into the following areas:

  • Major strengths/weaknesses: Look at all the products and services your potential competitor offers, and determine why certain products/services do better than others. Why are customers buying certain products and not others? How do customers view that company? Is the company growing rapidly or slowing down? If so, why?
  • Products/services: Make a list of all relevant products/services, starting with best-sellers. Note the selling points and differentiators.
  • Marketing strategy and objectives: Research how the company markets itself. Read all marketing, advertising, annual reports, sales material, etc. Call the company’s sales department and act like a potential customer. This will show how the company pitches their products/services to potential customers.
  • Financials: Obtain all public financial information about the company. Quarterly and annual reports are good sources for this. If all companies in this space are losing steam, then it might not be a good market to enter. Yet, if all are doing well, then there clearly is a need for it.
  • Market forecast: Determine if the market is growing. This will help prove that there are certainly enough customers for which to compete. If not, then the competition may be heavy for your product or service, and you’ll need to take steps to prove that your small business can compete in stiff competition. A market forecast will also determine if the market is breaking up into individual niches and other overall trends.

Putting together a competitive analysis will provide you and your business with information on how you can adequately compete in the market. It also shows potential investors and loan providers that you’ve done your homework and that you’re ready to launch.

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