How to Write the Competitors Analysis Section of the Business Plan

Writing The Business Plan: Section 4

Competitive chefs
Facing off with the competition. andresr / Getty Images

The competitors analysis section can be the most difficult section to compile when writing a business plan because before you can analyze your competitors, you have to investigate them.

First, Find Out Who They Are

The first step of preparing your analysis is to determine who your competitors are.

This isn't the hard part. If you're planning to start a small business that's going to operate locally, you can identify your competitors just by driving around, doing an internet search for local businesses or looking in the local phone book.

The main question for you will be one of range; if your business plan is centered around the idea of opening a bakery, how far will customers be willing to drive to get fresh buns or bread?

However, it may be that your local business will have also have non-local competitors.

If I'm selling office supplies, for instance, I may also have to compete with big-box retailers within a driving distance of several hours and companies that offer office supplies online. You want to make sure that you identify all your possible competitors at this stage.

Then Find Out About Them

Secondly, you need to gather the information about your competition that you need for the competitors analysis. This can be the hard part. While you can always approach your competitors directly, they may or may not be willing to tell you what you need to know to put together this section of your business plan.

You need to know:

  • What markets or market segments your competitors serve;
  • What benefits your competitors offers;
  • Why customers buy from them;
  • And as much as possible about their products and/or services, pricing, and promotion.

Gathering Information on Competitors

A visit is still the most obvious starting point - either to the bricks and mortar store, or to the company's website.

You can learn a lot about your competitor's products and services, pricing, and even promotion strategies by visiting their business premises, and may even be able to deduce quite a bit about the benefits your competitor offers. Go there, once or several times, and look around. Watch how customers are treated. Check out the prices.

You can also learn a fair bit about your competitors from talking to their customers and/or clients - if you know who they are. With a bricks and mortar local competitor, you might be able to find out about the reasons customers buy from them by canvassing friends and acquaintances locally.

Other good "live" sources of information about competitors include a company's vendors or suppliers, and a company's employees. They may or may not be willing to talk to you, but it's worth seeking them out and asking.

And watch for trade shows that your competitors may be attending. Businesses are there to disseminate information about and sell their products or services; attending and visiting their booths can be an excellent way to find out about your competitors.

You'll also want to search for the publicly available information about your competitors. Newspapers, magazines, and online publications may all have information about the company you're investigating for your competitive analysis.

Press releases may be particularly useful. 6 Ways to Find Out What Your Competition Is Up To provides even more tips for gathering the information you need.

Once you've compiled the information about your competitors, you're ready to analyze it. 

Analyzing the Competition

Just listing a bunch of information about your competition in the competitor analysis section of the business plan misses the point. It's the analysis of the information that's important.

Study the information you've gathered about each of your competitors and ask yourself this question:

How are you going to compete with that company?

For many small businesses, the key to competing successfully is to identify a market niche where they can capture a specific target market whose needs are not being met.

Is there a particular segment of the market that your competition has overlooked?

For example, if you hope to start a book store, and your competitor sells all kinds of books to all kinds of people, might you be able to specialize in children's books, or educational books and supplies?

Is there a service that customers or clients want that your competitor does not supply? What if you want to start a business offering computer repairs and you discover that none of the other computer repair businesses in town offer home service? Computer owners may have a desire for in-home repair services that you could meet.

The goal of your competitor  analysis is to identify and expand upon your competitive advantage - the benefits that your proposed business can offer the customer or client that your competition can't or won't supply.

Writing the Competitor Analysis Section

When you're writing the business plan, you'll write the competitive analysis section in the form of several paragraphs. You may wish to give each paragraph a separate heading.

The first paragraph will outline the competitive environment, telling your readers who your proposed business's competitors are, how much of the market they control, and any other relevant details about the competition.

The second and following paragraphs will detail your competitive advantage, explaining why and how your company will be able to compete with these competitors and establish yourself as a successful business.

Remember; you don't have to go into exhaustive detail here, but you do need to persuade the reader of your business plan that you are knowledgeable about the competition and that you have a clear, definitive plan that will enable your new business to successfully compete.

Go to the next section of the business plan: The Marketing Plan.

Return to The Business Plan Outline.

Why You Need to Write a Business Plan.