Business Planning: Your CompetitionMadi
Analysing your competition is a key component when writing your business plan. Understanding both your current and potential competitors is critical to ensure your business survives and grows. In this chapter of Business Planning you will learn the key aspects of conducting a competitor analysis.
An analysis can be a time-consuming exercise, to make the process easier start with the current businesses you are in competition with. For example, if you plan on opening a local bakery you should investigate the other bakery’s in your area.
To gather information, you don’t have to hire a private investigator. Go out and visit the bakery’s nearby and see how the customers behave, the customer demographics, see how the staff interact with them, check out the prices and even find out the suppliers they use. You can learn a lot from talking to the customers, their favourite items, what they think about pricing and why they go there.
Now you have seen the competition up close, you can dig a little deeper behind the scenes. Look into their social following, do they have a website, a Facebook profile, Twitter or Instagram? See if they have any advertising, reviews or promotional literature. If not, you have discovered what they are missing and can capitalise on it. You have identified your competition, now you can answer the following questions:
What are their strengths?
How are they unique to the market. What makes the customers come to them.
What are their weaknesses?
Find out what their business is lacking and if you can fill that gap.
What are their objectives?
View your industry through their eyes. Identify what they are trying to achieve.
What marketing strategies do they use?
Look at their advertising, social profiles and public relations.
How can you entice their customers?
What can you offer them that your competitors can’t.
Next you need to evaluate your indirect competition. Indirect competitors are businesses that offer a similar product or service to the same customer base indirectly. For the local bakery, the indirect competition would be supermarkets, online grocery and fast food delivery, bulk buying from suppliers and even petrol stations selling goods. Establish why your customers may chose the other businesses over yours and the potential impact.
The final step in your analysis is to identify potential competitors. It can be difficult to predict what future competitors will enter the market and when. Things to consider when doing this exercise are; what brought you to the market? What if a local sees your business success and in your footsteps or if one of your competitors expands? If you’re serving your market well, others may pursue their dream of starting their own business and become your competition.
When writing your business plan, summarise your findings by answering these questions:
- Who are my current, indirect and future competitors?
- What are their strengths and weaknesses?
- Who is their target market?
- What size company are they?
- What will happen if new competition enters the market?
Once your analysis is complete, you can make changes to your business plan to reflect your findings. Whether it be your pricing, the location or marketing tactics, by analysing your competition you can set yourself apart from the other businesses. An analysis shouldn’t stop at the business planning stage, it should be an everyday occurrence. Keeping your eye on the competition- both direct and indirect will be an important factor in your continuous success and longevity as a business.