Competitive Comparison

Every business has competition. Competition exists because a need has been established by customers and several companies have risen to respond to that need. Understanding and evaluating existing and potential competitors will enhance your company's strengths in the eyes of an investor. Investors are reassured when entrepreneurs assess the strengths and weaknesses of its company's competition in a business plan. It may seem counter-intuitive, but it's true. This clear-eyed analysis shows that you understand the financial "terrain" of your respective industry. It also demonstrates that you know how to make your business concept unique within your target market.

Your business plan's competitive comparison should show an awareness of the possible barriers to entry for your market. Common barriers include high start-up costs, market saturation, existing patents, and specific expertise required for the market. By "shopping the competition," your business plan will reflect an understanding of what customers want and how your competitors succeed-or fail-in addressing it. In the 21st century, for instance, the Internet ensures that your competition is not only around the block, but also around the world.

Offering a superior product or service is only part of the equation. The competitive comparison section of your business plan must show you understand other mitigating factors of your competition's success. These factors include whether or not they are a brand name, whether their product or service is cheap, or if they have a strong distribution system. Intangibles such as customer inertia also shouldn't be discounted. An entrepreneur should never underestimate that many customers feel comfortable with a product or service simply out of habit. You often have to prove that your company is significantly superior across several different categories to get customers to make a change in their lifestyles.

What if you are first to market with a unique product or service? Being a first mover certainly has advantages, such as defining a service, establishing mutually beneficial partnerships, and capturing significant customer attention. There is a danger, however, in being overtaken by competitors who come after you. After all, much of the hard work has already been done by you, and your competitors can evaluate you on how you succeed-or fail-to address your customers' needs. Your business plan must focus on your own strategies and methods, but it should ensure you know your competition's plan, too.