Competition in a Business Plan

… there is competition in the target market …

Who is the Competition?

In the previous section we described the target market for your business idea. However, there will be competition for the target market and this will limit the share of the market you can obtain. If you can’t find any competitors, the chances are there isn’t a market.

By carrying out a competitor analysis a business will be able to identify its own strengths and weaknesses, and produce its own strategy. For example a review of competitor products and prices will enable a business to set a realistic market price for its own products. The competition section of the business plan aims to show who you are competing with, and why the benefits your product provides to customers are better then those of the competition; why customers will choose your product over your competitors.

Competition analysis should include answers to the following questions:

  • Who are our competitors?
  • What are the competitors main products and services?
  • What threats does the competitor pose to our business?
  • What are the strengths and weaknesses of our competitors?
  • What are the objectives in the market place of the competitors?
  • What strategies are the competitors using?
  • What is the competitors market share?
  • What market segments do the competitors operate in?
  • What do customers think of the competition?
  • What does the trade think of the competitor?
  • What makes their product good?
  • Why do customers buy their product?
  • What problems do customers have with the product?
  • What is the competitors financial strength?
  • What resources do the competition have available?

The focus is on how well the customer benefits and needs are satisfied compared to competitors, and not on how the features of the product compare. For example, key customer benefits might include affordability, can be purchased online, or ease of use, but not a technical feature list.

Competition Presentation in the Business Plan

The business plan competitor section can be presented in a number of formats including a competitor matrix, but an informative way of presenting is using Harvey balls. Harvey balls allow you to grade each customer benefit from zero to four, and to show a comparison of these benefits to your main competitor products. The competitors might be individual identified companies, or a generic competitor such as ‘fast food restaurants’.

In the example below, the key benefits of the product are compared against three main competitors. Each row represents a key benefit to the customer, the first column represents your business, and the remaining three columns each represent a chosen competitor.

At the top of each column, details of the size of the business in terms of net assets and unit sales are shown. Underneath the comparison to the competition is made using Harvey balls on a rating of zero (blank circle) to four (completed circle).

competition v 1.0
Competition

The investor will want to understand that your product has the potential to take a major share of the chosen target market by being shown that it is sufficiently competitive for a number of key customer benefits.

This is part of the financial projections and Contents of a Business Plan Guide, a series of posts on what each section of a simple business plan should include. The next post in this series will deal with the competitive advantages the business has in the chosen target market.

Last modified February 11th, 2019 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.

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