How to research and analyze your competition for a business plan like a pro

The absolute “no-no” of a successful business is thinking that your company, product or service is so unique that there is virtually no competition for it.

And nothing will kill your business plan in the eyes of potential backers faster than claiming there is no competition for what you’re offering.

Every business has competitors. 

Whatever your solution to the needs of a customer, someone else somewhere else has another solution. Or will have, once they have seen yours.

Whether you want to acknowledge it or not, your competitors are out there – and they’re just as hungry as you are.

Unless you’ve identified yours and know how you’re going to beat them, your business will be vulnerable.

Keep reading to find out how to catapult your business success with great competitive analysis.

Purpose: WHY is Competition Analysis Important?

In other words, competitive analysis tells us where they’re thriving–and where they’re failing.

That’s all well and good, but what will you actually gain from the process of analysing your competitors in the marketplace?

In a business plan, competitive analysis demonstrates that you know how to differentiate your business in the marketplace, leveraging your understanding of who your key competitors are, what they are doing, and their competitive strengths and weaknesses.

Content: WHAT Should Competitive Analysis Include?

Sure, doing a competitive research isn’t rocket science, but you’ll need a little bit more than a few simple Google searches to properly identify and asses your competitors.

Let me show you a simple, easy-to-follow process to help you complete a competitor analysis fast:

1. Competitive Landscape

The first logical step in the competitive intelligence research process is to identify the key players in the competitive landscape for your products or services your competitors in 3 steps:

1.1. Key Competitors:
Identify your biggest rivals in the marketplace

1.2. Indirect Competitors:
Make sure that you have identified not only direct, but also the key indirect competitors

1.3. Segmented Competition:
If you are selling more than one product or service, or you are targeting multiple target customer groups, describe the competitors by segment

1.1. Identify Direct Competitors:

This section is where you identify your competition, in other words:

  • Who are your competitors?
  • What are the competing products and who supplies them?

List the key alternative solution providers that compete with you (known as competitors), and products or services that already exist as alternatives to yours.

But what if there are really no competitors doing the same thing you are doing?

That is common with new, innovative business ideas. Well, your competitors are whoever was providing an alternative solution to the customer before your business/product/service existed, competing for a similar share of the customer’s wallet as you are.

As a result, your challenge will be to figure out how to outcompete all of those well-known alternatives by which your potential customers are solving their problems today.

1.2. Identify Indirect Competitors:

Consider the other, even less obvious and indirect, ways customers can address their problems.

The difference between direct and indirect competitors is that:

  • Direct competitors are vendors who address the same customer problem with the same solution.
  • Indirect competitors address the same customer problem with a different solution.


Suppose you are hungry, want quick and inexpensive service, predictable outcome, and don’t really care about calories or ingredients:

  • Pizza Hut and Domino’s Pizza would be direct competitors in this scenario, because they solve your problem with the same solution – pizza.

  • Pizza Hut and Burger King are indirect competitors, because they solve your problem with a different solution – pizza and burgers with fries.

  • You could also decide to go to a pricier pizzeria, order UberEats takeout, or even make yourself a pizza from frozen in your oven at home. You’ve guessed it, all these are indirect competitors of Pizza Hut, because they offer different approaches for consumers to solve the same problem.
Competitor Type Explanation Example: Pizza Hut
Direct The same solution to solve a customer's problem. Pizza Hut <> Domino's Pizza
Indirect Different approaches to solve the same problem. Pizza Hut <> Burger King / UberEats / home-made pizza

1.3. Segment Competition

Your competitive analysis will be much more accurate if you identify your competition by product line or service and market segment.

Figure out whether each of your main business rivals competes across the board, or just plays in a segment for a specific products/service or for certain customer segment, based on customer geographic, demographic, psychographic and behavioural characteristics.

For example, a competitor could only focus on one of many geographic areas that you are planning to target.

2. Competitive Intelligence

Well done, you have now successfully identified your main direct and indirect competitors in each segment.

Next, collect some competitive intelligence on them.

Simply put, you need to create summary profiles of your key market rivals, considering characteristics such as:

  • Size:

Sales and market share, preferably by main segment. Number of employees (e.g., sales or customer service agents) may also be relevant.

  • Growth:

Performance statistics and rationale (e.g., growing or contracting market share and sales over the last three years, along with reasons why)

  • Profitability:

Gross and net profit margin (if available, which is unlikely for private companies that do not have to publish their financial results publicly)

  • Pricing:

What your rivals charge for their product or service that you are competing with

  • Ownership:

Ownership structure and debt/equity financing  

  • Location:

Geographic location and reach (e.g., marketing and sales, facilities, service teams)

  • Physical assets:

For example, automobile factory heavily dependent on machinery versus SaaS startup with virtually no physical assets

  • Products and services:

Range of services/products offered that you are competing with, their features and benefits, and why customers might choose them

  • Segmentation:

Market segments addressed, importance of the key segments to the competitor, and any plans for the future (e.g., new products or services in the pipeline, new markets to enter, new customer groups to target)

  • Market strategy:

Overall strategic focus (e.g. cost v differentiation), online/offline presence, market positioning, recent investments, growth plans (e.g., future strategy could be noted in competitors’ annual reports, indicated by areas they are hiring in, or even spelled out on their website and social media)

Comment on any factors that could help you and the reader of the business plan better understand your competitive environment.

3. Competitor Comparison

Now that you know who your competitors are and what they do, it’s time to assess how intense the competition you face actually is.

Evaluate the competitive intelligence you have collated so far to uncover any significant strengths and weaknesses of your rivals compared to everyone else in the target market, including your business and what you have to offer.

Highlight any details that are pertinent to getting a good grasp on how your company compares to the competition.

4. Competitive Advantage

This last step of your competitive analysis is the most important one. Essentially, it’s what you’ve been working towards this whole time:

Compare the pros and cons of your business with the competition to discover your competitive advantage.

In other words, assess what exactly will give shoppers a reason to choose your products or services over everyone else’s.

A business can achieve competitive advantage in any number of different ways, including but definitely not limited to:

  • Operational efficiencies
  • Branding
  • Quality
  • Customer service
  • Intellectual property
  • Technological advancement
  • Skilled labor
  • Geographic location
  • Large distribution channel
  • High entry barriers in the industry
  • High bargaining power

Make your case for why you believe people will desert established competitors and buy from you instead.

5. Competitive Response

Consider how competitors may react to losing some of their business as a result of your entry into the market – and how you, in turn, will respond to that.

Remember that even if your idea is protected by a patent or other intellectual property rights, there are always legal ways for a competitor to navigate a workaround around them. For example, offering a slightly different variation on the theme can often be sufficient.

Hence, an effective competitive response is a combination of multiple factors and continuously thinking ahead.

6. Future Competition

Finally, you and your potential backers (if applicable) want to get a sense of what is likely to happen in your market over the next few years and even further into the future. And why.

For example, explain your predictions regarding the following two points:

  • Is the competition in your main business segments likely to intensify or ease off as the time goes on.
  • What are the main risks and opportunities around your industry competition over the next couple of years.

Knowing this, you can do your best to tackle the biggest competitive risks and opportunities up front.

The one crucial thing to remember about competitive analysis is that it’s a never-ending cycle.

There’s always competition. It just depends on how much and where it’s coming from.

The market keeps continuously changing and surprising us.

By monitoring and analysing your competition on an ongoing basis, you’ll get to understand their behaviour. This understanding will enable you to anticipate their actions and put your best foot forward to stay one step ahead of your competitors at all times.

Research: HOW Do You Conduct Competitor Research?

There are many (!) great ways to research and collect competitive intelligence.

My best competitor research tips are summarized in the Primary and Secondary Research post. The information is equally applicable to industry, market and competitive research.

But just to give you some suggestions right now, here are a couple of good sources of information that might help you with researching the competition portion of your business plan:

  • Testing:
    Go ahead and actually try out the products and services from your largest competitors

  • Online presence:
    Analyze the website and social media content of your competitors

  • Online customer reviews:
    Browse through the competition’s reviews on Yelp, Google My Business and/or similar applicable sites

  • Online employee reviews:
    Read competitors’ reviews on Glassdoor and other job sites

  • Annual reports:
    Check out the annual reports of your competition (if public) as they can be a real treasure-trove of information that your competitors disclose on their own initiative and as required by law

  • Google alerts: Set up Google Alerts on the competition so you are always on top of their news and updates

Business Plan: HOW to Write the Competition Analysis Chapter?

Here are my 3 top tips on writing the competitive analysis section in a business plan:

1. Separate It

Stand apart from the majority of plans by devoting a whole chapter to competitive analysis.

Most business plans do one of three things:

  1. Skip analysing the competition altogether, not addressing it in the plan at all.

  2. Just state something along the lines of: “Our product/service/business idea is so new and unique that there is no competition in the market for it.”

  3. Competition is addressed as part of another chapter, such as the Market Research & Analysis.

Do something different. Dedicate an entire business plan section to competitor analysis.

I’ve done this for all my clients and it works like gangbusters because:

  1. Business plan readers, like investors and lenders, love it as doing so clearly demonstrates that you’ve done your homework and saves them time.

  2. Most importantly, it will give you an opportunity to thoroughly get to know your market, assess your real chance of succeeding, and position your business accordingly to stand out in the market.

2. Appendix It

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3. Visualize It

This section of a business plan is ripe for the use of visual aids, such as charts, graphs and images.

For example:

  • Tables make it much easier to compare different aspects of competitors’ businesses side by side.

  • Pie charts are the ideal way to display each main competitor’s slice of the proverbial “pie”, i.e. the market share in your main business segments.

  • Graphs are suitable for comparing financial data of the key competitors, such as sales, pricing and growth.

  • Photos of products can make it much easier to understand the differences in competitive product offerings, rather than trying to explain them only verbally.

  • Images of logos help with brand recognition when referring to different competitors and their brands.

Related Questions

What is a Competitive Strategy?

Competitive strategy is a plan of action through which a business intends to gain and maintain long term competitive advantage, resulting from continuous evaluation of strengths, weaknesses, opportunities and threats in its competitive environment.

What Are the Examples of Competitive Strategies?

Michael Porter, the authority on competitive strategy, defines three ways to develop competitive advantage by selling something that is unique (differentiation), cheaper (cost leadership), or targets a specific market segment (focus) through differentiation or cost leadership.

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