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September 22, 2010

How to Address Your Competition in Your Business Plan

If you want to raise capital, you need a business plan.

Click here for a free presentation that shows you how to finish your business plan in 8 hours or less.

When writing your business plan, you will complete a section called the Competitive Analysis. This section defines who and what your competition is, their strengths and weaknesses, and the ways in which you will overcome that competition.

Many companies mistakenly believe they have no competition, because their products or services are unique in form. What these companies do not understand is that investors define competition as any service or action that fulfills the same customer needs that the company does.

The company that claims no competition therefore makes their management team look foolish. Not only that, but a lack of competition implies that the industry is not large enough to support the massive profits that investors are looking to make.

Companies that claim a lack of competition do not get funded.

On the other hand, companies with too much competition may appear unable to take a sizable market share of the industry.

Again, no funding.

This is often called the “competition dilemma,” and it is a trick question. You must trick the question right back – outside your Competitive Analysis.

The Customer Analysis is the best place answer competition dilemma. Aside from customer profiles, demographics, and psychographics – all of which much be as specific as possible – the Customer Analysis also lays out the needs of your customers.

As stated above, need is the very essence of competition. You are looking to fulfill a customer need using your product or service to such an extent that people will pay real money for it.

In your Customer Analysis, include research that shows such figures as:

how many customers have purchased a similar product or service;
how many customers would purchase a product or service like yours; and what these numbers imply.

This absolutely nips the competition dilemma in the bud, and stops the trick question dead in its tracks.

So first, prove you know your market in the Customer Analysis. Then you can go on to describe your direct and indirect competitors – and how you will do a far better job of serving the customer needs – in the Competitive Analysis.

Click here for a free presentation that shows you how to finish your business plan in 8 hours or less.

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