How to Create a Competitive Analysis for Your Business Plan

A competitive analysis is a key component of your business plan. It provides insights into your competitors and highlights your position within the market. This helps in strategizing effectively to stand out from the competition. In this guide, we’ll walk you through the steps of researching and analyzing competitors, including their strengths and weaknesses, and using that information to identify opportunities and develop strategies that help you expand your own business.

 

How is Researching the Competition Helpful in Developing a Business Plan?

Conducting a comprehensive competitive analysis ensures that your business is well-positioned in the target market. Understanding your competitors helps you identify gaps, refine your competitive edge, and make informed decisions about pricing, marketing strategies, and customer experience.

There are two key types of research you should conduct for a competitive analysis:

• Primary Research – This involves collecting firsthand data by engaging directly with the market. Methods include customer surveys, interviews, focus groups, purchasing competitors’ products, and analyzing interactions on social media platforms. Primary research gives real-time insights into customer preferences, pain points, and buying behaviors.
• Secondary Research – This involves analyzing existing data from external sources such as industry reports, competitor websites, financial statements, government publications, and third-party market research firms. Secondary research helps you understand overall market trends, industry benchmarks, and how competitors are performing on a broader scale.

By combining both primary and secondary research, you gain a well-rounded perspective of your competition, allowing you to position your business effectively and capitalize on opportunities in the market.

 

7 Steps for Conducting a Thorough Competitive Analysis

Here’s how to conduct a competitive analysis that will reinforce your overall business strategy.

Step 1: Identify Your Competitors

First, the competitive analysis involves identifying your business competitors, both direct and indirect competitors. Direct competition includes those whose products or services and market segments match up closely with your own business or the same customers. Indirect competition meets similar customer needs but via different solutions. Make use of tools like market research, surveys, and online searches to assemble your list.

 

Step 2: Examine Competitor Strengths and Shortfalls

Evaluate every competitor’s strengths and weaknesses. Look into areas such as the competitors’ sales and marketing tactics, market share, quality of their goods or service offerings, pricing strategy, customer service, and tech innovations. Using a SWOT analysis framework (Strengths, Weaknesses, Opportunities, Threats) can be really handy here, giving a deeper dive into where your competition stands tall and where they might falter.

Sample Competitive Matrix

Step 3: Find Out Who Their Customers Are

Look at the competitor’s target demographic data such as age, location, gender, income level, and education to identify common characteristics within their target markets. Equally important are psychographics like lifestyle, values, and buying behavior.

 

Step 4: Check Their Financial Stability

Whenever possible, you need to look at your competitors’ financial performance. If possible, look at all of their financials: balance sheets, cash flow statements, and profit margins. This information can help you see how profitable they are and any financial trends in their business.

 

Step 5: Examine Their Distribution Methods

Dig into the distribution methods employed by your competitors to grasp their sales tactics and extent of market reach. Whether they utilize direct sales, online marketplaces, or collaborate with third-party distributors, understanding these pathways can assist in refining your own distribution strategies for better market presence.

 

Step 6: Compile Your Discoveries

Gather your discoveries into a coherent analysis. Highlight areas where your business can leverage competitors’ weaknesses and set itself apart. These are your competitive advantages or the factors that make your business unique and valuable to customers. These could include better customer service, more competitive pricing, innovative product features, a stronger brand voice, or a more convenient purchasing experience that meets your target customers’ needs more effectively.

Also, pinpoint potential threats and create strategies to counteract them. Consider developing contingency plans for new competitors, economic shifts, or technological advancements that could impact your industry.

 

Step 7: Add it to Your Business Plan

Include this thorough competitor analysis in your business plan. Utilize it to bolster your marketing, operational, and financial strategies. Demonstrating how you plan to position your business against competitors can be compelling to investors and stakeholders.

 

Competitive Analysis Examples

The following examples were written by PlanPros’ AI business plan generator, providing real-world insights into how businesses can assess their competitive landscape.

 

Example #1: Thrive Digital Competitor Analysis

Direct Competitors

Thrive Digital’s competitors include the following companies:

Compuvate

Compuvate is a digital marketing agency based in New York, NY. The company focuses on a range of marketing solutions and can handle small to mid-sized businesses. Compuvate emphasizes its approach of integrating technology with marketing strategies to achieve client goals.

Compuvate offers a variety of products and services, including:

• SEO Services – Custom pricing based on client needs
• PPC Advertising – Starting at $500 per month
• Social Media Marketing – Starting at $300 per month
• Web Design and Development – Custom pricing

The agency targets businesses primarily within the New York metropolitan area. It serves a diverse range of industries, including healthcare, retail, and technology. Compuvate’s key strengths include a focus on measurable results and a personalized approach to each client.

However, the company may face challenges in scalability due to its focus on personalized services. Some reviews indicate room for improvement in response times to client inquiries.

DiscoverMyBusiness

DiscovermyBusiness is a digital marketing agency located in New York, NY. This agency specializes in online advertising and digital strategy, aiming to help businesses enhance their online presence. It caters to businesses of varying sizes, providing tailored solutions to fit different needs.

The agency offers several services, such as:

• Google Ads Management – Starting at $400 per month
• Facebook Ads Management – Starting at $300 per month
• Search Engine Optimization – Custom pricing
• Website Development – Custom pricing

DiscovermyBusiness primarily targets small to medium-sized enterprises in New York and surrounding areas. The agency’s strengths lie in its expertise in paid advertising and its commitment to transparency with clients.

Some clients have noted the agency’s competitive pricing as a strength, but there are occasional concerns about the limited range of services compared to larger agencies.

Media Saga SEO

Media Saga SEO operates out of New York, NY, providing a comprehensive suite of digital marketing services. The agency serves clients across various sectors, with a focus on enhancing brand visibility and online engagement.

Media Saga SEO offers a wide range of services, including:

• SEO Services – Custom pricing
• Social Media Management – Starting at $300 per month
• PPC Management – Starting at $500 per month
• Web Design and Development – Custom pricing

The agency targets small to large businesses, extending its services beyond New York to other major cities. Its key strengths include a comprehensive service offering and a strong focus on customer satisfaction.

Some weaknesses might include variability in service quality, as noted by some client reviews. Additionally, the agency may face competition from larger firms with more extensive resources.

Competitive Advantages

At Thrive Digital, we pride ourselves on offering unparalleled social media management services that set us apart from the competition. Our team of experts is adept at crafting tailored social media strategies that not only increase brand visibility but also foster genuine engagement with target audiences. We leverage the latest technologies and data analytics to ensure that our clients’ social media presence is both dynamic and results-driven. Our innovative approach allows us to continuously adapt to the ever-evolving digital landscape, ensuring our clients are always ahead of the curve.

In addition to our superior social media management, we offer a unique and delightful perk that distinguishes us in the bustling market of New York City: a diverse selection of bagel varieties. Our clients enjoy an array of fresh, locally sourced bagels during consultations and meetings, creating a welcoming and memorable experience. This small yet significant touch not only enhances client relationships but also reflects our commitment to delivering exceptional service in all aspects. Furthermore, our strategic location in the heart of New York provides us with invaluable insights into the latest industry trends, allowing us to offer customized digital marketing solutions that cater to the specific needs of our clients.

 

Example #2: LittleSunshine Daycare Competitor Analysis

Direct Competitors

LittleSunshine Daycare’s competitors include the following companies:

Wellspring Academy

Wellspring Academy is a prominent daycare located in Denton, TX. It can accommodate over 100 children, ensuring a comprehensive learning and care environment. The academy is strategically located to serve families in the Denton area, providing convenience to parents who work or live nearby.

Wellspring Academy offers a range of services tailored to early childhood education. These include:

• Full-day daycare services start at $850 per month
• Half-day programs available at $500 per month
• Extracurricular activities such as art and music classes are included in the tuition

The academy targets working parents and families in Denton and surrounding areas who seek quality childcare services. Their customer base primarily includes parents of children aged 6 weeks to 5 years.

Wellspring Academy’s strengths include its experienced staff and comprehensive curriculum. However, one of its weaknesses could be the relatively high tuition fees compared to other local options, which may limit accessibility for some families.

Tender Loving Care Preschool

Tender Loving Care Preschool serves the community of Denton, TX, with a focus on nurturing and educational daycare services. The preschool can accommodate around 80 children and is located in a residential area, making it accessible for local families.

The preschool offers diverse programs, such as:

• Early childhood education programs start at $600 per month
• After-school care for $200 per month
• Summer camps and special programs priced individually

Targeting families in Denton, Tender Loving Care Preschool primarily caters to children aged 2 to 6 years. The preschool is popular among working parents seeking a safe and engaging environment for their children.

Its strengths lie in its personalized care and well-structured programs. However, the preschool’s limited capacity might disadvantage parents seeking immediate enrollment options.

The Children’s Learning Station

The Children’s Learning Station is a daycare center in Denton, TX, that emphasizes a blend of play-based and structured learning. The facility can accommodate approximately 90 children and offers a vibrant and engaging setting.

Services offered include:

• Full-time daycare is priced at $700 per month
• Part-time care options available at $400 per month
• Specialized programs like language and science for an additional fee

The daycare serves the Denton community and nearby regions, focusing on children aged 1 to 5 years. It attracts parents interested in a balanced approach to early childhood education.

The Children’s Learning Station is known for its qualified staff and diverse programs. However, its additional fees for specialized programs might be considered a drawback for budget-conscious families.

 

Conclusion

Understanding the competitive landscape is crucial when developing a business plan, as it offers insights into both past and present competitors, along with their strengths and weaknesses. Before formulating a business strategy that distinguishes your company from its rivals, a full grasp of the market landscape is essential. Follow the step-by-step guide above and you will be well-prepared to craft a compelling competitive analysis section for your business plan.