Business Plan Competitive Analysis

How to Research and Write the Competition Part of Your Business Plan

© Bonny Albo

The Competition section of a business plan usually comes after the Market Analysis section in the Business Overview, which is usually found at the very start of all business plans. It can also be one of the more challenging portions of a business plan, and for good reason: scoping out both the direct and indirect competitors of a specific business idea is time consuming, sometimes frustrating, and its results can force you to change your whole business plan idea entirely. Then again, that's why you want to write a business plan before you start any business - to alleviate those sorts of pesky problems. So grab a pen and paper, and start working through your competitive analysis now.
Type of Competition

There are two different types of competition: direct and indirect. Direct competitors are other businesses vying for the same customers that you currently are or will be once your doors open. For instance, a children's clothing store would have other kids clothing stores as direct competition. Indirect competition, on the other hand, are businesses that may take business away from your customer base, but they may not as well. They aren't selling exactly what you have to offer, but a consumer might think they do. Using the kids clothing store example again, some indirect competitors would be used clothing stores and seamstresses.

Write a list of the different types competitors you have now, generalizing them into categories instead of business names for the time being. If you aren't coming up with more than one or two indirect competitors, ask friends or family for ideas.
Competitors

Once you have several types of competitors listed in your competitive analysis, it's time to come up with some real-life examples of each one. If you have a lot of competitors in one area, then it's fine to generalize once again. Department stores are a direct competitor for a kids clothing store; there is no need to list them all in a business plan, since most will be in competition with your business along the same lines as one another. But if there is a mom and pop shop down the street that is unique and potentially a big pull for your customers that also sells clothing for wee ones, make sure to list their name here. As well, for each competitor or category of competitor, write a small blurb to describe the company in a very general way for someone who may know nothing about the industry or your geographic area.
Competitors' Strengths and Weaknesses

Now comes the fun part: visiting the companies you've listed in the competitors section of your competitive analysis. Whether it's a visit to your competitors store or online marketplace, you'll need to go as if you are a secret shopper, tuned into every nuance of the business. How do they show their merchandise? What are their prices like? How helpful are the staff? How many customers are there?

Take notes on each of the competitors or categories you have listed. Who does what better? What can you compete with, and what can't you? For instance, you may not have prices as inexpensive as the big box stores, but you have locally produced products that are one-of-a-kind and cannot be found elsewhere. Every business has strengths and weaknesses, and it's your job now, while writing this business plan, to figure out what each one's is.
Competitive Advantage

The rest of the competitive analysis talks about your competitors, but the competitve advantage is where your business is supposed to shine. What do you do - or plan on doing - differently? Why would customers come to your store and not the others you have listed? Again, every business will excel at some things and not so much at others, so there is no reason for you to pump things up extraordinarily either. Anyone who reads your business plan is looking for realism, not pie in the sky dreams, so make sure that this section really shows off your strengths in the best light possible.

Source : http://entrepreneurs.suite101.com/article.cfm/business_plan_competition