Every small business starts with a business plan. It’s essential to your success. And most guides will tell you that you need to analyze how your business is going to run, your unique traits, and your financial efficacy. All of that is true, but there’s one often overlooked element that can make or break your business plan — analyzing your competitors.
What Is a Competitor?
A competitor is any business that creates a similar product for the same market segments as you do. This means that your company and their company are effectively vying for the same space within a market.
Competitors can fall into three categories:
- Direct: They offer the same products or services to the same clients within the same territory as your business.
- Secondary (indirect): They offer slightly different products or services or target a different client base, but they’re still in the same territory as your business.
- Substitute: They offer different products and services, but to the same clients and in the same territory as your business.
How to Evaluate Your Competition
When you’re writing your business plan, it’s important to conduct research on your competitors to ensure that your business is going to have enough room to be successful.
Factors to take into consideration during your research include:
- Products and services that they offer
- Pricing
- Their positioning and branding techniques
- Their market reputation
Once you’ve done your research, try to analyze your competitors’ strengths and weaknesses. Having this information is going to help you compare your own business’s performance to theirs and can give you valuable insight into how you could adapt your strategies to be successful in the market.
Consider Making Friends
You don’t always have to be adversarial to your competitors. Sometimes it can be beneficial to enter into mutually beneficial relationships with them.
Consider speaking with potential competitors as you launch your business; you never know what opportunities those connections could bring you. Even if you can’t get along with them, speaking with them could still give you valuable market information that you’ll need later.