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How to Write the Competitive Analysis for Your Business Plan
Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on February 19, 2023
Updated on December 12, 2023
Starting a business usually involves countless tasks, and one of the most important early hurdles is writing a business plan. Many entrepreneurs who aren’t looking for funding think they can skip this step, but that’s never a good idea.
A crucial element of the business plan is the competitive analysis, mainly because only by understanding your competition will your company be able to beat them.
Fortunately for you, this handy guide lays out all you need to know to whip up an excellent competitive analysis that’s sure to give you a serious advantage.
What is a Competitive Analysis?
A competitive analysis describes your competitors and their products or services and identifies their strengths and weaknesses and competitive advantages. Writing the analysis involves detailed research and an examination of your competitors, their strategies, and their customers.
The goal is to identify how your business can gain a competitive advantage, usually by capitalizing on competitors’ weaknesses or beating them in a particular area, such as price or customer service.
A competitive advantage is critical to the success of your business, and something investors tend to focus on, so be sure to do your homework to determine yours.
Steps to Write a Competitive Analysis
Writing a competitive analysis involves several steps.
1. Identify your top competitors
First, identify 5-10 competitors. They can be direct or indirect competitors. Direct competitors sell the same or similar products, while indirect competitors sell different products that solve the same problem. Burger King is McDonald’s direct competitor, for instance, while Chipotle is an indirect competitor.
A good competitive analysis begins with a brief overview of each competitor.
2. Research your competitors
Next, research those competitors to find out more about what they offer, how they offer it, and to whom. You can get this info on the company’s websites, social media, marketing, and any news and financial reporting.
Their marketing should help you to identify their value proposition and their target market. It may help to study their marketing through the eyes of a consumer.
What need do they fill? Who would find their marketing appealing? Where do they advertise? If their ads appear on TikTok, they’re looking to attract a younger market.
Read customer reviews to learn more about what they’re doing right, and more importantly, areas in which they fall short. You might even want to buy some of your competitors’ products, which would certainly help you with the next section of the plan.
3. Compare products
Now it’s time to thoroughly compare your competitors’ products to your own, examining the features and uses, as well as pricing, quality, and market placement.
This should show you how your product stacks up and give you ideas about how to improve it, perhaps with new features or added options.
4. Identify competitor strengths and weaknesses
By now you should be able to identify the strengths and weaknesses of your competitors. What do they do well? Where do they fall short? In your competitor summaries, list the strengths and weaknesses of each.
5. Identify competitor competitive advantages
At this point you should know each competitor’s competitive advantage. What is their key differentiator? How does their product stand out? A competitive advantage is usually one of the following:
- Customer service
- Brand awareness
- Rapid innovation
- Unique features
- High quality
- Corporate social responsibility
- Empathetic marketing
- Employee expertise
6. Determine your competitive advantage
Now we get to the whole point the competitive analysis – figuring out where your business can gain an advantage. What does your company offer that they don’t? What can you do better than they do? Review the above list of competitive advantages – does any of them jump out to you?
It could be something your business already does or has, or something you need to implement to gain an edge. Either way, it’s critical that you identify at least one differentiator that’s likely to persuade customers to choose your business.
Structure Your Competitive Analysis
As previously mentioned, your competitive analysis should be structured as a series of summaries about each competitor and how your company compares. It might help to create a chart or table to illustrate your main points and findings.
Each summary should mention the key product features as well as strengths, weaknesses, and competitive advantage. Conclude the plan by explaining your competitive advantage, as well as how you will leverage it and sustain it.
Sounds like a lot of work, right? And this is just one part of your business plan!
A great deal of effort and research goes into a good competitive analysis, which highlights the complexity, and the importance, of writing a business plan. It’s a lot of work, but also a fantastic learning opportunity that will help develop informed strategies that shape your business.
Even if you’re not seeking funding, take the time to write a solid business plan and be sure to dig into the competitive analysis. After all, finding and embracing your business’ competitive advantage is likely to be one of the keys to your success.
How to Write the Competitive Analysis for Your Business Plan
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