5. Competitive Analysis
Why Your Competitive Analysis is Important
In this section of your plan, you need to provide an overview of your competitors.
This is important since readers want to know 1) you understand your competitive environment, and 2) have competitive advantages that will allow you to succeed.
Importantly, when entrepreneurs tell investors they have no competition, it often raises a red flag. This is because if there’s no competition, it signals that a market does not exist. Sometimes competition is indirect (as detailed below, this is when a different solution solves the customer’s needs than yours). For instance, when washing machines were invented, while there were no direct competitors (other washing machine brands), there was indirect competition (consumers manually washing their clothing).
What to Include
The Competitive Analysis section of your plan has three sub-sections: Direct Competitors, Indirect Competitors and Competitive Advantages.
Direct competitors are companies that fill the same customer need you do with the same or a similar solution. For example, direct competitors of a pizza shop would be other local pizza shops.
Detail your direct competitors here. What products/services do they offer? At what price points?
Below is the information checklist to include for each competitor:
- Competitor’s Name
- Overview of Competitor (where are they located; how long have they been operating)
- Products/services offered
- Customer segments/geographies served
- Competitor’s key strengths
- Competitor’s key weaknesses
Direct competitors are companies that fill the same customer need you do with a different solution. For example, a supermarket that sells frozen pizzas would be an indirect competitor to a pizza shop.
Detail your indirect competitors in this section. What products/services do they offer? At what price points? Use the same 9-point checklist mentioned above for direct competitors.
In this section of your plan, you need to detail the reasons your company is positioned to outperform both direct and indirect competitors.
Below is a list of areas in which you might have competitive advantage. Review each and expand upon the relevant ones:
- Products and/or Services
- Human Resources
- Operational Systems
- Intellectual Property
For instance, you could say that your [enter any of the bullets from above] is better than your competitors because [insert reason].