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How to perform a competitive assessment

The competitive analysis or assessment section of your business plan is devoted to analysing your competition. This includes market research into both your current competition and potential competitors who might enter your market.

Understanding the strengths and weaknesses of your competition – or potential competition – is critical to making sure your business survives and grows.

A competitor analysis does more than help you understand your competition. It can also help you identify changes you should make to your business strategies to give you a competitive advantage. You can learn from your competitors' strengths, take advantage of their weaknesses, and apply the same analysis to your own business plan.

With the advent of new competitor analysis tools, business owners have the ability to know more about their competition than ever before. It is extremely important to regularly conduct a thorough competitive assessment in order to stay one step ahead. You might be surprised by what you can learn about your own business by evaluating the competition.

If serving your market seems easy you can safely assume competitors will enter your market.

1. Profile current competitors

Develop a basic profile of each of your current competitors.

2. Answer some basic questions about your competition

Conduct a SWOT (strengths, weaknesses, opportunities, threats) analysis and answer some basic questions to understand your competition. Remember to be objective. It's easy to identify weaknesses in your competition, but less easy to recognise where they may be able to outperform you.

  • What are their strengths? Price, service, convenience, extensive inventory are all areas where you may be vulnerable.

  • What are their weaknesses? Weaknesses are opportunities you should plan to take advantage of.

  • What are their basic objectives? Do they seek to gain market share? Do they attempt to capture premium clients? See your industry through their eyes. What are they trying to achieve?

  • What marketing strategies do they use? Look at their advertising, public relations, etc.

  • How can you take market share away from their business?

  • How will they respond when you enter (or expand in) the market?

3. Keep tabs on your competition

Build business intelligence on them in an ongoing basis so you get to know their behavior and can start to anticipate what they will be likely to do next. You can then plan your own strategies to keep your customers and win customers away from competitors.

Where can you gather competitor information?

  • Check out their websites and marketing materials.

  • Browse the internet for news, public relations, and other mentions of your competition.

  • Search blogs and Twitter feeds as well as review and recommendation sites.

  • Dig deeper. Check out SpyFu, Google Trends and Google Alerts and SEM Rush.

  • Visit the competitions’ physical locations.

  • Evaluate their marketing and advertising campaigns.

4. Identify potential competitors

It can be tough to predict when and where new competitors may pop up. However, in general terms, if serving your market seems easy you can safely assume competitors will enter your market.

A good business plan anticipates and accounts for new competitors.

Now you are ready to distil what you've learned by answering these questions in your business plan:

  • Who are my current competitors? What is their market share? How successful are they?

  • What market do current competitors target? Do they focus on a specific customer type, on serving the mass market, or on a particular niche?

  • Are competing businesses growing or scaling back their operations? Why? What does that mean for your business?

  • How will your company be different from the competition? What competitor weaknesses can you exploit? What competitor strengths will you need to overcome to be successful?

  • What will you do if competitors drop out of the marketplace? What will you do to take advantage of the opportunity?

  • What will you do if new competitors enter the marketplace? How will you react to and overcome new challenges?

A final note

Keep in mind most investors look closely at the competitive analysis within a business plan. Showing you understand your competition, you understand your strengths and weaknesses relative to that competition, and you understand you’ll have to adapt and change based on that competition and an ever-changing marketplace is critical.

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