Competitive analysis for a business plan, with example

The competitive analysis in a business plan shows who else is selling to your customers, why customers choose them, and why enough of them will choose you instead. Lenders read it to judge whether your sales forecast is believable. Investors read it to judge whether you understand the market better than the people already in it.

Both want the same thing, whether the template calls it a competitive analysis or a competitor analysis for the business plan: one or two pages, a comparison table and a clear answer to "why you". Here is what they look for, a structure, and a filled sample.

What lenders and investors look for

They read the same section with different questions in mind.

The published guidance is consistent. The US Small Business Administration's competitive analysis guidance asks you to assess competitors' market share, strengths and weaknesses, your window of opportunity, how important your target market is to them, barriers to entry, and "indirect or secondary competitors who may impact your success".

In the UK, the British Business Bank's Start Up Loans business plan template has a section on customers, market and competition, asks how you will differentiate "on factors like price, quality, brand", and tells applicants to "use evidence and examples to back up any statements you make".

For investors, Sequoia's guide to writing a business plan puts it in one line: "Who are your direct and indirect competitors. Show that you have a plan to win."

All three ask for indirect competitors as well as direct ones, and for a reason you win.

How to structure the competitive analysis in a business plan

Seven parts, in this order. A page or two in total.

1. The market in a paragraph. Who buys, how often, and how they choose today.
2. Direct competitors. Three to five, named, with location or website.
3. Indirect competitors and alternatives. Different businesses solving the same problem, plus doing it yourself or not bothering.
4. A comparison table on the criteria customers actually use to choose: price, convenience, quality, speed, trust.
5. Your advantage, and why it lasts. What you do better, and why a competitor cannot copy it next month. The idea of a competitive advantage that lasts is the heart of this part.
6. How competitors will respond. What incumbents are likely to do when you open, and your answer.
7. Sources. Where each fact came from, and when you checked it.

Part 6 is where most plans are silent and where experienced readers look first.

Sample competitive analysis for a business plan

A filled example for an invented business. Every name, price and number is hypothetical; it shows the standard, not real data.

Fettle Mobile Bike Repair plans to service and repair bikes at customers' homes and workplaces in one UK city, starting with one van.

The market. Commuters and families with bikes worth servicing. They choose on convenience, price and trust. Most use a bike shop's workshop today, which means getting the bike there and back.

Direct competitors.

• Spoke & Chain, an independent shop with a workshop in the city centre. 4.8 stars from 310 Google reviews. Standard service £70. Phone booking only; reviews mention waits of up to two weeks in spring.
• The workshop in a national cycle retailer's store on the retail park. Standard service £60. Online booking. Reviews are mixed on quality.
• Another mobile mechanic, a sole trader covering the north of the city. 4.9 stars from 42 reviews. Standard service £75. Facebook page only, no online booking.

Indirect alternatives. Servicing the bike yourself from online videos; not servicing it until something breaks; occasional on-site maintenance days run through workplace cycle schemes.

How we compare.

Our advantage. We remove the trip to the shop, which reviews of both shops complain about repeatedly, and anyone in the city can book online. Contracts with three local employers (letters of intent in the appendix) give a base of weekday work. The advantage that lasts is route density: as regular customers build up in each area, our cost per job falls, which a single van covering one district cannot match.

How competitors may respond. Spoke & Chain may add collection and delivery; we still win on time, because a collected bike still joins the workshop queue. The national retailer could cut its price; we are not chasing the cheapest customer, and our forecast assumes no price war. The other mobile mechanic may expand; the city is large enough for two vans, and our price sits within £3 of his.

Sources. Prices from each competitor's website or price list, and review counts from Google, both checked on [date]. Waiting times from reviews posted last spring.

That is about 450 words and one table, and a lender can check every fact in it.

How to research it without a budget

Most of it takes a day.

• Search and maps for your product or service in your area: every competitor with a listing, rating and review count.
• Their websites and price lists, screenshotted with the date.
• Their reviews, especially the three-star ones, for the weaknesses you will build on.
• Companies House in the UK for limited companies: directors, age, and whether the accounts suggest growth.
• Search demand over time, to show the market is not shrinking; Google Trends comparisons show how.
• Ten potential customers. Ask how they solve the problem now. Their answers are your indirect competition.

For the full desk method, how to do competitor research takes an afternoon.

Mistakes that make readers stop trusting the plan

"We have no competitors." Every guide quoted above asks for indirect competitors for a reason. Saying "none" tells the reader either that you have not looked, or that there is no demand.

A table you win on every row. Readers know nobody wins every row. Show where a competitor beats you and explain why it does not matter to your customer.

Top-down market share. "The market is worth £50 million and we only need 1%" convinces nobody. Build the forecast from the bottom up: jobs per day, days per year, price per job.

Ignoring how incumbents respond. Established businesses do not stand still when you open nearby.

Undated, unsourced facts. A price you remember from last year is a guess. Date every fact and say where it came from.

Pages of history. Nobody needs each competitor's founding story. Keep what affects customers' choices.

Naming a giant to sound ambitious. If you will not really compete with a national brand, listing it as your main rival suggests you do not know who you compete with.

Adding a framework, if you need one

Most plans do not need a named framework; the table above does the job. If the plan is for a new market, or an investor asks about industry structure, add Porter's five forces. Competitor analysis frameworks compared covers when each one is worth the time.

After the plan is approved

The competition section is true on the day you write it. Once you are trading, keep it true: check competitors' prices, reviews and pages at least monthly, and update the section before any review with your lender or your next funding round. Competitor monitoring explains how to do that in about half an hour a week.

Tools can do the collection for you once there is something to watch. Our own Figo checks pricing pages, new pages, ads, rankings, social posts and reviews once a week, at $49 a month for three competitors. Ours, so judge accordingly. Before you have opened, it is overkill, and the manual checks above are enough.