The opinions expressed by Entrepreneur contributors are their own.
This is part 1 of 8 of the “Writing a Business Plan: Section 4: Marketing Your Business Plan” series.
Readers of your business plan may want to see an industry with few established competitors and a fast-growing trajectory with great potential. Or you may be interested in a larger market where your competitors may be disengaging from the market, leaving you open to rivals, even if growth is somewhat slower.
Whatever the facts, they need to be backed up with a snapshot analysis of the current state of the industry and the trends that are occurring. This is not just an afterthought. You need to support your opinion with market research that identifies your specific competitors and outlines their weaknesses and strengths and barriers to market entry. Finally, and perhaps most importantly, you need to convincingly explain what makes you better and destined for success.
Related: How to gain a competitive advantage: 4 important questions to ask when analyzing your competitors
This is where you should focus.
local market
More than 90% of all businesses are local. Unless your business is set up to sell to a local or broader market, focus on customers in your immediate vicinity. You can leverage your knowledge of local economic conditions and trends to more thoroughly identify and study your direct and indirect competitors. The better you know your market area, the better you can serve and profit from it.
Current state of the industry
When preparing your industry trends section, you should expand your focus from your company to outside your company. Rather than viewing your business as a self-contained system, describe the entire industry you operate in and show your place in that world. Then, depending on the scope of your business, you can start focusing on your country, state, or local community.
Related: How to make your business stand out
This part of the plan may be a little more involved than other sections, as it involves gathering information from many external sources. We may also report on industry trends or conduct our own research.
competitors
Even if you are running your home business alone, you are not alone. We also have competitors to worry about. And your backers will also be worried about competition. Even if you are in the rare position of tackling an entirely new market with no competitors, most experienced people who read your plan will have questions about potential competitors. For these reasons, a special section of your plan should be devoted to identifying your competitors.
You can develop a list of your competitors by talking to customers and suppliers, checking with industry associations, and reading trade publications. But just naming your competitors isn't enough. You need to know how they operate and how they compete.
Related: How to identify and research your competitors
your competitive advantage
That you are offering someone who is considering joining your company, whether as an investor or otherwise, something distinctly different and better than what you are already offering. need to be persuaded. This is usually referred to as a competitive advantage, but it's no exaggeration to say that it's the company's raison d'être.
“One of the mistakes that many startups make is thinking that just because no one else is doing exactly what they are doing, their business is secure.” says Tim Berry, founder of BPlans. “If you're having trouble finding competitors, the smart thing to do is to ask yourself, 'Why isn't someone else doing it?'
He added: “Don't just think of competition as other companies doing the same thing as you. Think of your product replacing what's currently on the market.”
Related: 10 questions to answer before pitching to investors
That is the difference between direct competition and indirect competition. When Henry Ford began successfully mass producing automobiles in the United States, he had no other automakers to compete with. His competitors were carriage manufacturers, bicycles, and railroads. ”
Barrier to entry
An important part of market analysis is determining the barriers to entry and how high those barriers are. Higher barriers are more likely to delay the emergence of new competitors. Lower barriers mean more opportunities to participate in the game.
Related: How to create a business plan that attracts investors
