How to write the competition analysis of a business plan
There are many reasons why we write business plans. One of the major reasons is that a business plan helps you to analyze the strengths and weaknesses of your business through what we call the SWOT analysis, and compares yours with that of your competition. Like it or not, business competition is warfare and survival of the smartest! One of the benefits of competition analysis is that it helps you to see the areas of weaknesses of your competitors that you can explore and their areas of strength that you can imbibe and improve upon to gain a competitive edge. To be certain of how well you are faring in business, you need to gain an understanding of your position as it compares to that of your competitor.
Steps to writing the competition analysis of a business plan
The interesting thing about this competition analysis is that it may be quite challenging since you have to investigate your competitors before you can attempt to analyze them. If you want to have an effective competition analysis, the following steps will surely get you there.
- Identify who your competitors are
The first thing is to identify your competitors by making a list of businesses or companies that offer products or services similar to yours. Depending on you and how wide you want your research and analysis to be, you can identify and itemize between 3 and 10 competitors. If you run a local business or you want to start one, determining who your competitors are is quite simple and obvious because you probably can see these competitors all around you always, but if you want to do business at a high level and no one else does business at that level in your local environment, you will need to look outside of your immediate environment to spot your competitors. In this case, the internet might be your best friend to find them. Usually, your competitor is that business that is targeting and trying to sell to the same set of customers that you are selling to – or are planning to sell to, not just that they sell the same product or services as you do. Two businesses may offer similar products and services and may even be located in the same locality, if they are not selling to the same set of customers, I wouldn’t think of them as competitors because nothing is at stake – there’s no reason to war!
- Study your competitors
Once you have identified who your competitors are, the next thing would be to begin to study them. The exact information you need is such that won’t be obvious in most cases, you need to look intently for it. Some of them are codes that you will have to crack and secrets about your competitors that you will have to decode. This is because you are looking for something that’s supposed to be secret, which your competitors are committed to protecting and keeping safe. So, to find your competitors’ secrets, you need to be discreet, smart, patient, tenacious, strategic, and determined – it may not come as cheaply as you would have expected. So when studying your competitors, what are the exact details you should look out for?
- Their product and/or services
- Their pricing and promotions
- Their offers and benefits
- What their customers like about them
- What segments of the market do they target or focus on?
- Why do customers buy from them?
- What is their marketing strategy?
- How do they craft or design their marketing communications?
To be able to access all the data you need from your competitors, the following are quite important.
- Visit their physical store or office or business premises often and observe
- Visit their Social Media handles
- Visit their website
- Read their blog posts
- Look at their adverts – print and media
- Their partnerships, if any
- Analyze the information gathered
All of the data you have gathered above does no good if they don’t “tell you” certain things about your competitors that are actionable. The whole essence of the study is to determine how you currently compete in reality and what to do to outperform your competitors through better innovation. Business competition is warfare – the innovation of one person will end up killing the business of the other, and if you aren’t going to be the one to go into extinction, you must outperform competition but you can’t even start if you have no idea what your competitors are doing and how they are doing what they do. In doing this, you might want to see if the information you have gathered can help you provide answers to the following questions
- What do your competitors have that you lack?
- In what areas lies their strength?
- What are they doing well?
- Which segment of the market are they serving?
- If customers love them, their products, or services, find out why?
- Can you improve on something they are doing?
- Is there any segment of the market that is not currently being served, overlooked by your competitors?
- Are there any desires of the customers that are not currently being fulfilled by your competitors?
Overall, the goal of this analysis is to determine your competitive advantage, capitalize on it and strengthen it by adding to it leveraging on your competitors’ weak points.
How to write the competition analysis of your business plan
We have now gotten to the place where all of the researches conducted on your competitors and the resultant finding and conclusions will be communicated to make a point with lenders or investors. So the following are quick tips to simplify how to write the competition analysis section of your business plan.
In this section of your business plan, you should begin by describing the industry and the market as well as the positions of your competitors. When writing this aspect, it is a great mistake for you to rubbish your competitors and present them in the light that makes you look better than they are, just because you want to look good to investors or lenders. It will always backfire, so don’t do it. Ensure you talk about the strengths of your competitors that you have been able to identify. That is the first step.
The next step is to present your competitive advantage, that is, you should state why and how you will compete with them in that light. Your job here is to be able to convince your reader that you understand your market, you understand who your competitors are and what they are doing, and you have what it takes to play the game and win.
Finally, be concise, use the right words and ensure you give yourself a good time to read it over at least three times so you have the opportunity to detect and correct possible errors before the final submission.
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