How to Write the Competitor Analysis Section of the Business Plan

Writing The Business Plan: Section 4

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How to Write the Competitors Analysis Section of the Business Plan. Robin Skjoldborg / Getty Images

The competitor 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. Here's how to write the competitor analysis section of the business plan. (See this Simple Business Plan Template for a complete template you can use to create your business plan.)

First, Find Out Who Your Competitors 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, chances are you already know which businesses you're going to be competing with. But if not, you can easily find out by doing an internet search for local businesses, looking in the online or printed local phone book, or even driving around the target market area. 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?

Your local business may have also have non-local competitors that you need to be aware of.

If you're selling office supplies, for instance, you 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

Next you need to gather the information about your competition that you need for the competitor 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;
  • as much as possible about their products and/or services, pricing, and promotion.

Gathering Information for Your Competitor Analysis

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 discover 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 competition.

You'll also want to search for the publicly available information about your competitors. Online publications, newspapers, and magazines 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 landscaping business and there are plenty of competitors offering regular landscaping services, can you capture the trend to reducing water consumption by specializing in drought friendly landscaping?
  • 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.

Competitive Matrix Analysis

One helpful way to analyze the competition is to compare them with your business in the form of a matrix as in this example where you intend to target the high end of the market as it does not appear to be currently targeted by your competitors:

 My CompanyCompany ACompany BCompany C
PriceHighAverageAverageLow
QualityHighAverageAverageLow
Hours8-5 Mon.-Sat.8-5 Mon.-Fri.8-5 Mon.-Fri.8-5 Mon.-Fri.
ServiceExcellentGoodFairFair
Customer Loyalty FairFairLow
Advertising FairFairNil
WebsiteYesYesNoNo
FacebookYesNoNoNo

Writing the Competitor Analysis Section

When you're writing the business plan, you'll write the competitor 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.

See also:

Why You Need to Write a Business Plan

Simple Business Plan Template