Know Your Competition Better than They Do - Part 8 of the 2009 Business Plan Series | Network Solutions - Small business conversations and working together for small business success

Know Your Competition Better than They Do – Part 8 of the 2009 Business Plan Series

February 23, 2009 :: Steve Fisher

You have been living and breathing this thing called your business for some time now. You have been writing for a while and there are so many ideas and details swimming around in your head. Now you have to think hard about how you measure up against the competition. The competitive analysis section covers how you are differentiating yourself by describing the competition and why you will stand out from them and beat them in the long run.

Get a few things answered first

Before you get started on this section you need to have the following questions answered:

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

You can learn these things by gathering information on your competitors. So how do you do that? Dumpster dive.

Competitor Dumpster Diving

There is an old term from computer hackers called “dumpster diving”. The concept was to dive into the dumpsters to get printouts or old manuals in the hope of finding phone numbers, user manuals, passwords, computer programs and anything else that might help you hack into a system.

About.com Canada has some excellent advice on gathering information on your competitors:

A visit is still the most obvious starting point – either to the bricks and mortar store, or to the company’s Web site. You can learn a lot about your competitor’s products and services, pricing, and even promotion strategies by visiting their business site, 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 may be a 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.

Once you’ve compiled the information about your competitors, you’re ready to analyze it. Tips and instructions for analyzing the competition are on the following page.

Breaking it all down

There are a few key sections of the competitive landscape in a business plan.

The first is Competitive Analysis Summary. The point of this section is to give some one reading this without diving into the details the top points and reasons that your company is different and beats the competition. Hopefully, this section will be compelling and interesting enough that people will read into it more. Most likely, people will not read to deep into the competition but it is there for review when necessary and is an exercise you must complete.

The second is Competitive Analysis Matrix. This can be done in table format with the main competitive areas and companies on different axis. Many times people will spin the diagram so your company has all the boxes checked. Don’t do this. Be honest and recognize the 800lb gorilla. Don’t fear them, understand how to beat them.

Once you are done the summary you must go into more details regarding competitive advantages and competitive disadvantages. Hopefully, the advantages will out weigh the disadvantages.

Competitive Advantages are the ways that you stand out from the competition. Examples could be the following:

* Integrated Payment Processing for Credit Cards and Checks/Wire Transfers
* Streamlined marketing systems that integrates popular third party data
* High performance reporting and business intelligence analysis capabilities
* Ability to market in real time
* Providing a branded and personalized portal interface for X
* Building a patented technology to be licensed and integrated with major technology platforms and portals
* Flexible foundation technology designed to expand into other types of alternative services
* Providing an outsourced call center to assist companies with customer service requests and after hours client management
* Ability to leap frog our competitors who have designed their systems on an outdated business model

Competitive Disadvantages are the threats and adversity you must overcome from the competition. Examples could be the following:

* Segment is extremely fragmented making any type of scale difficult
* Our market penetration is shallow at this point
* Our track record and reputation in the industry is unknown
* Product Development in proof of concept phase behind one competitor
* Larger competitors could invest lots of money to compete very quickly

Last on in this section is the best way to wrap it up. This are the Barriers to Entry that will make you a real threat to the competition. Examples could be the following:

* Low cost offering of superior technology to lock in a provider network
* Patentable technologies for license to other providers
* Personnel with deep industry knowledge and extensive contacts
* Current customer inertia from our current network
* Existing relationships with vendors and providers
* Deep network of partners and managers

Final Thoughts…

While this is a critical section that makes you test your business before you start and might make you change a few things for the better, this should not be an incredibly long section. James Joyce already wrote Ulysses, so we don’t need 200 pages on the competition. Keep that in your research files. However, 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.

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