what is competitive edge in business plan

How to Write a Competitive Analysis for Your Business Plan

11 min. read

Updated January 3, 2024

Do you know who your competitors are? If you do, have you taken the time to conduct a thorough competitor analysis?

Knowing your competitors, how they operate, and the necessary benchmarks you need to hit are crucial to positioning your business for success. Investors will also want to see an analysis of the competition in your business plan.

In this guide, we’ll explore the significance of competitive analysis and guide you through the essential steps to conduct and write your own. 

You’ll learn how to identify and evaluate competitors to better understand the opportunities and threats to your business. And you’ll be given a four-step process to describe and visualize how your business fits within the competitive landscape.

• What is a competitive analysis?

A competitive analysis is the process of gathering information about your competitors and using it to identify their strengths and weaknesses. This information can then be used to develop strategies to improve your own business and gain a competitive advantage.

• How to conduct a competitive analysis

Before you start writing about the competition, you need to conduct your analysis. Here are the steps you need to take:

1. Identify your competitors

The first step in conducting a comprehensive competitive analysis is to identify your competitors. 

Start by creating a list of both direct and indirect competitors within your industry or market segment. Direct competitors offer similar products or services, while indirect competitors solve the same problems your company does, but with different products or services.

Keep in mind that this list may change over time. It’s crucial to revisit it regularly to keep track of any new entrants or changes to your current competitors. For instance, a new competitor may enter the market, or an existing competitor may change their product offerings.

2. Analyze the market

Once you’ve identified your competitors, you need to study the overall market. 

This includes the market size , growth rate, trends, and customer preferences. Be sure that you understand the key drivers of demand, demographic and psychographic profiles of your target audience , and any potential market gaps or opportunities.

Conducting a market analysis can require a significant amount of research and data collection. Luckily, if you’re writing a business plan you’ll follow this process to complete the market analysis section . So, doing this research has value for multiple parts of your plan.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

3. Create a competitive framework

You’ll need to establish criteria for comparing your business with competitors. You want the metrics and information you choose to provide answers to specific questions. (“Do we have the same customers?” “What features are offered?” “How many customers are being served?”)

Here are some common factors to consider including: 

• Market share
• Product/service offerings or features
• Distribution channels
• Target markets
• Marketing strategies
• Customer service

4. Research your competitors

You can now begin gathering information about your competitors. Because you spent the time to explore the market and set up a comparison framework—your research will be far more focused and easier to complete.

There’s no perfect research process, so start by exploring sources such as competitor websites, social media, customer reviews, industry reports, press releases, and public financial statements. You may also want to conduct primary research by interviewing customers, suppliers, or industry experts.

You can check out our full guide on conducting market research for more specific steps.

5. Assess their strengths and weaknesses

Evaluate each competitor based on the criteria you’ve established in the competitive framework. Identify their key strengths (competitive advantages) and weaknesses (areas where they underperform).

6. Identify opportunities and threats

Based on the strengths and weaknesses of your competitors, identify opportunities (areas where you can outperform them) and threats (areas where they may outperform you) for your business. 

You can check out our full guide to conducting a SWOT analysis for more specific questions that you should ask as part of each step. 

• How to write your competitive analysis

Once you’ve done your research, it’s time to present your findings in your business plan. Here are the steps you need to take:

1. Determine who your audience is

Who you are writing a business plan for (investors, partners, employees, etc.) may require you to format your competitive analysis differently. 

For an internal business plan you’ll use with your team, the competition section should help them better understand the competition. You and your team will use it to look at comparative strengths and weaknesses to help you develop strategies to gain a competitive advantage.

For fundraising, your plan will be shared with potential investors or as part of a bank loan. In this case, you’re describing the competition to reassure your target reader. You are showing awareness and a firm understanding of the competition, and are positioned to take advantage of opportunities while avoiding the pitfalls.

2. Describe your competitive position

You need to know how your business stacks up, based on the values it offers to your chosen target market. To run this comparison, you’ll be using the same criteria from the competitive framework you completed earlier. You need to identify your competitive advantages and weaknesses, and any areas where you can improve.

The goal is positioning (setting your business up against the background of other offerings), and making that position clear to the target market. Here are a few questions to ask yourself in order to define your competitive position:

• How are you going to take advantage of your distinctive differences, in your customers’ eyes? 
• What are you doing better? 
• How do you work toward strengths and away from weaknesses?
• What do you want the world to think and say about you and how you compare to others?

3. Visualize your competitive position

There are a few different ways to present your competitive framework in your business plan. The first is a “positioning map” and the second is a “competitive matrix”. Depending on your needs, you can use one or both of these to communicate the information that you gathered during your competitive analysis:

Positioning map

The positioning map plots two product or business benefits across a horizontal and vertical axis. The furthest points of each represent opposite extremes (Hot and cold for example) that intersect in the middle. With this simple chart, you can drop your own business and the competition into the zone that best represents the combination of both factors.

I often refer to marketing expert Philip Kohler’s simple strategic positioning map of breakfast, shown here. You can easily draw your own map with any two factors of competition to see how a market stacks up.

It’s quite common to see the price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality.

Competitive matrix

It’s pretty common for most business plans to also include a competitive matrix. It shows how different competitors stack up according to the factors identified in your competitive framework. 

How do you stack up against the others? Here’s what a typical competitive matrix looks like:

For the record, I’ve seen dozens of competitive matrices in plans and pitches. I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.

4. Explain your strategies for gaining a competitive edge

Your business plan should also explain the strategies your business will use to capitalize on the opportunities you’ve identified while mitigating any threats from competition. This may involve improving your product/service offerings, targeting underserved market segments, offering more attractive price points, focusing on better customer service, or developing innovative marketing strategies.

While you should cover these strategies in the competition section, this information should be expanded on further in other areas of your business plan. 

For example, based on your competitive analysis you show that most competitors have the same feature set. As part of your strategy, you see a few obvious ways to better serve your target market with additional product features. This information should be referenced within your products and services section to back up your problem and solution statement. 

• Why competition is a good thing

Business owners often wish that they had no competition. They think that with no competition, the entire market for their product or service will be theirs. That is simply not the case—especially for new startups that have truly innovative products and services. Here’s why:

Competition validates your idea

You know you have a good idea when other people are coming up with similar products or services. Competition validates the market and the fact that there are most likely customers for your new product. This also means that the costs of marketing and educating your market go down (see my next point).

Competition helps educate your target market

Being first-to-market can be a huge advantage. It also means that you will have to spend way more than the next player to educate customers about your new widget, your new solution to a problem, and your new approach to services. 

This is especially true for businesses that are extremely innovative. These first-to-market businesses will be facing customers that didn’t know that there was a solution to their problem . These potential customers might not even know that they have a problem that can be solved in a better way. 

If you’re a first-to-market company, you will have an uphill battle to educate consumers—an often expensive and time-consuming process. The 2nd-to-market will enjoy all the benefits of an educated marketplace without the large marketing expense.

Competition pushes you

Businesses that have little or no competition become stagnant. Customers have few alternatives to choose from, so there is no incentive to innovate. Constant competition ensures that your marketplace continues to evolve and that your product offering continues to evolve with it.

Competition forces focus & differentiation

Without competition, it’s easy to lose focus on your core business and your core customers and start expanding into areas that don’t serve your best customers. Competition forces you and your business to figure out how to be different than your competition while focusing on your customers. In the long term, competition will help you build a better business.

• What if there is no competition?

One mistake many new businesses make is thinking that just because nobody else is doing exactly what they’re doing, their business is a sure thing. If you’re struggling to find competitors, ask yourself these questions.

Is there a good reason why no one else is doing it?

The smart thing to do is ask yourself,  “Why isn’t anyone else doing it?”

It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, and do your market research. If you determine that you’ve got customers out there, you’re in good shape.

But that still doesn’t mean there’s no competition.

How are customers getting their needs met?

There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now. 

Are there any businesses that are indirect competitors?

Don’t think of competition as only other businesses that do exactly what you do. Think about what currently exists on the market that your product would displace.

It’s the difference between direct competition and indirect competition. When Henry Ford started successfully mass-producing automobiles in the U.S., he didn’t have other automakers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.

Do a competitive analysis, but don’t let it derail your planning

While it’s important that you know the competition, don’t get too caught up in the research. 

If all you do is track your competition and do endless competitive analyses, you won’t be able to come up with original ideas. You will end up looking and acting just like your competition. Instead, make a habit of NOT visiting your competition’s website, NOT going into their store, and NOT calling their sales office. 

Focus instead on how you can provide the best service possible and spend your time talking to your customers. Figure out how you can better serve the next person that walks in the door so that they become a lifetime customer, a reference, or a referral source.

If you focus too much on the competition, you will become a copycat. When that happens, it won’t matter to a customer if they walk into your store or the competition’s because you will both be the same.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• Don't let competition derail planning

Related Articles

10 Min. Read

How to Set and Use Milestones in Your Business Plan

How to Write the Company Overview for a Business Plan

24 Min. Read

The 10 AI Prompts You Need to Write a Business Plan

6 Min. Read

How to Write Your Business Plan Cover Page + Template

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

• Search Search Please fill out this field.

What Is a Competitive Advantage?

• How It Works
• How To Build It
• Competitive vs. Comparative Advantage

The Bottom Line

• Business Essentials

Competitive Advantage Definition With Types and Examples

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals. Competitive advantages are attributed to a variety of factors including cost structure, branding , the quality of product offerings, the  distribution network , intellectual property, and customer service.

Key Takeaways

• Competitive advantage is what makes an entity's products or services more desirable to customers than that of any other rival.
• Competitive advantages can be broken down into comparative advantages and differential advantages.
• Comparative advantage is a company's ability to produce something more efficiently than a rival, which leads to greater profit margins.
• A differential advantage is when a company's products are seen as both unique and of higher quality, relative to those of a competitor.

Investopedia / Michela Buttignol

Understanding Competitive Advantage

Competitive advantages generate greater value for a firm and its shareholders because of certain strengths or conditions. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. The two main types of competitive advantages are comparative advantage and differential advantage.

A comparative advantage is when a firm can produce products more efficiently and at a lower cost than its competitors.

A differential advantage is when a firm's products or services differ from its competitors' offerings and are seen as superior. Advanced technology, patent-protected products or processes, superior personnel, and strong brand identity are all drivers of differential advantage. These factors support wide margins and large market shares.

For example, Apple is famous for creating innovative products, such as the iPhone, and supporting its market leadership with savvy marketing campaigns to build an elite brand. Another example is major drug companies. They can market branded drugs at high price points because they are protected by patents.

The term "competitive advantage" traditionally refers to the business world, but can also be applied to a country, organization, or even a person who is competing for something.

How To Build a Competitive Advantage

To build a competitive advantage, a company can use one of three main methods:

• Cost: Provide offerings at the lowest price
• Differentiation: Provide offerings that are superior in quality, service, or features
• Specialization: Provide offerings narrowly tailored to a focused market

Competing on price can be effective, but if you slash prices too much you risk decreasing profit margins to an untenable level. Many firms opt instead to differentiate themselves in other ways, which helps preserve or expand their profit margin.

Benefits of a Competitive Advantage

When a company creates a durable competitive advantage, it sets itself apart from the competition and provides value to customers as well as stakeholders. By producing a desirable product or service that is better or more cost-effective than its competitors,' the company can make more sales, generate more revenue, and enjoy greater profits.

Strategies to Build a Competitive Advantage

To build a competitive advantage, a company must know what sets it apart from its competitors and then focus its message, service, and products with that difference in mind. Here are several strategies companies use to build a competitive advantage:

• Research the market : Market research helps a company identify and define its target market, which can guide it in developing the most effective advantage.
• Identify strengths : A company can find its unique strengths, especially relative to competitors, by reviewing products, services, features, positioning, and branding.
• Evaluate finances : Companies can take a close look at their financial performance to spot profit centers and areas of stability, using financial statements and ratios.
• Review operations : How efficient is a company's operations? Where is it effective, and where is there room for improvement? Consider customer service as well as production and supply chain management.
• Consider human resources : The talent a company can attract as employees and leadership can make an important difference in the success of the business. Evaluating company culture, hiring, and staffing practices can help.

Competitive Advantage vs. Comparative Advantage

A firm's ability to produce a good or service more efficiently than its competitors, which leads to greater profit margins, creates a comparative advantage. Rational consumers will choose the cheaper of any two perfect substitutes offered. For example, a car owner will buy gasoline from a gas station that is 5 cents cheaper than other stations in the area. For imperfect substitutes, like Pepsi versus Coke, higher margins for the lowest-cost producers can eventually bring superior returns.

Economies of scale , efficient internal systems, and geographic location can also create a comparative advantage.

Comparative advantage does not imply a better product or service. It only shows the firm can offer a product or service of the same value at a lower price.

For example, a firm that manufactures a product in China may have lower labor costs than a company that manufactures in the U.S., so it can offer an equal product at a lower price. In the context of international trade economics, opportunity cost determines comparative advantages. 

Amazon ( AMZN ) is an example of a company focused on building and maintaining a comparative advantage. The e-commerce platform has a level of scale and efficiency that is difficult for retail competitors to replicate, allowing it to rise to prominence largely through price competition.

How Do I Know If a Company Has a Competitive Advantage?

If a business can increase its market share through increased efficiency or productivity, it would have a competitive advantage over its competitors.

How Can a Company Increase Its Competitive Advantage?

Lasting competitive advantages tend to be things competitors cannot easily replicate or imitate. Warren Buffet calls sustainable competitive advantages economic moats , which businesses can figuratively dig around themselves to entrench competitive advantages. This can include strengthening one's brand, raising barriers to new entrants (such as through regulations), and the defense of intellectual property.

Why Do Larger Companies Often Have Competitive Advantages?

Competitive advantages that accrue from economies of scale typically refer to supply-side advantages, such as the purchasing power of a large restaurant or retail chain. But advantages of scale also exist on the demand side—they are commonly referred to as  network effects . This happens when a service becomes more valuable to all of its users as the service adds more users. The result can often be a winner-take-all dynamic in the industry.

How Is Competitive Advantage Different From Comparative Advantage?

Comparative advantage mostly refers to international trade. It posits that a country should focus on what it can produce and export relatively the cheapest—thus if one country has a competitive advantage in producing both products A & B, it should only produce product A if it can do it better than B and import B from some other country.

A company's competitive advantage is the way it excels compared to its rivals. This advantage may be through cost leadership, differentiation, or focus. Identifying a company's competitive advantage helps show how it is positioned to be more successful than its competitors, creating more revenue and generating greater profits.

Young African Leaders Initiative. " Action Your Business Growth: The Importance of Knowing Your Competitive Advantage ."

U.S. Small Business Administration. " Market Research and Competitive Analysis ."

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

• 400+ Sample Business Plans
• WHY UPMETRICS?

Customers Success Stories

Business Plan Course

Strategic Canvas Templates

E-books, Guides & More

Business consultants

Entrepreneurs and Small Business

Accelerators and Incubators

Educators & Business Schools

Students & Scholars

AI Business Plan Generator

Financial Forecasting

AI Assistance

Ai Pitch Deck Generator

Stratrgic Planning

See How Upmetrics Works  →

• Sample Plans

Small Business Tools

What is a Competitive Advantage? Explained with Examples

Free Competitive Analysis Kit

Aayushi Mistry

• December 12, 2023

Competitive advantages are the strengths and opportunities that you have over your competition.

It includes all the factors that help you stand out from your competition. It is also the factor of seeing which your target audiences may decide to go with your product/service over your competitors.

Depending on your industry, there can be many other advantages. However, eventually, it is the factor that earns you more sales and gives you a surplus in profit.

What is a Competitive Advantage?

Competitive advantages are the strengths and opportunities that you have over your competition. It is an attribute that allows a company to achieve superior profits compared to its rivals and generates more value for the company, customers, and shareholders.

11 Common Competitive Advantage Examples

Strong Branding is one of the strongest sustainable competitive advantages. A lot goes into making a brand like building customer relationships, quality service/product, time, and money.

But when the company is identified as a brand in the market, it brings you a positional advantage. And at the same time, your sales become easier and wider.

2. Network Effect

The network effect happens when the value of a product or service depends on the number of its users.

In a positive network effect, the more people use it, the more valuable the product becomes. Once the user base reaches a critical mass, it’s extremely hard for anyone else to achieve the same position.

Scale can give companies a sustainable advantage in several ways. For example, in the retail industry, large chains can use their scale to buy merchandise at low prices unavailable to their smaller competitors.

4. Customer Lock-in

Some businesses make products or services that have very high switching costs for customers. For example, enterprise automation software such as ERP systems is so tightly integrated with critical customer functions that changing an ERP vendor is unthinkable.

5. Patents/Intellectual Property

Patents are essentially a temporary monopoly granted by the governments to stimulate risky R&D. Example: biotech and pharmaceutical companies.

6. Know-how/Monopolies

If a critical enabling element can be kept secret, it can become a source of sustainable advantage.

7. Economies of Scale

The basic tenet of economies of scale is that the cost per unit declines as output increases. The lower cost per unit is largely driven by the presence of fixed costs within the business’s cost curve.

8. Exclusive Access to a resource

Exclusive or near-exclusive access to valuable resources can give a sustainable advantage. For example, China currently provides nearly 95% of the world’s rare earth metals.

9. Exclusive License

Sometimes governments grant exclusive licenses to businesses. For example, Stepan is the only company in the US that is legally allowed to import coca leaves and extract cocaine from them.

10. Cost Advantage

Cost advantage can be achieved through economies of scale. This makes it difficult for competitors to match the low prices.

11. Adapting Product Lines

For products that continuously evolve, many tech companies could fit in this category.

Want to Perform Competitive Analysis for your Business?

Discover your competition’s secrets effortlessly with our user-friendly and Free Competitor Analysis Generator!

How do I know if a company has a Competitive Advantage?

During competitive analysis , you must have come across a few factors where you stand out from your competitors. If these unique factors bring you any strength or opportunity, then those advantages are valuable. And only then, they can help you thrive.

For example, if you have a larger team than your competitor, then it is a competitive advantage. But you also need to look closer and see how this is bringing you any profit. Is this advantage helping you bring more business? Is this advantage helping you serve more customers/clientele? Is this advantage making a positive impact on your branding? If yes, then it is bringing you value. Hence, it is valuable.

Other than that, there are a few different perceptions to look at your competitive advantage:

Is your Competitive Advantage Sustainable?

Sustainable competitive advantages are company assets, attributes, or abilities that are difficult to duplicate or exceed; and provide a superior or favorable long-term position over competitors.

In this case, you have an advantage that your competition can not easily catch up with. It can include having new features for your service/products, initiating new sales and marketing strategies , or introducing new technology. This advantage is simply intuitive. It is so much like a race-Looking at the current situation, the industry knows what is the next step. But whoever implements it first has an advantage.

For example, Apple. Inc had this advantage when they released AirPods. That step was intuitive and groundbreaking and sustainable until their competitors had a similar product.

Is your Competitive Advantage Replaceable?

You may have a great advantage. But you need to know if that is replaceable. For example, people who still don’t use AirPods, still have traditional earphones that work equally well. In fact, you will find a lot of people who would prefer earphones to air pods. In that case, having air pods as an advantage is a replaceable advantage.

Similarly, you may have a large team to cater to your target market and your company. But at the same time, if your competitor can invest in heavy technology and innovation to do the same work, then they have a replaceable advantage.

Is your Competitive Advantage Strategic?

Such an advantage is mostly seen in the R&D department, sales, and marketing as well as in operations.

Is your Competitive Advantage Rare?

In these cases, your competition will not have this feature in their product/service or business. A lot of times, such an advantage lies in the way you operate. It can include having unique raw materials, a unique team management system, quicker transportation, a better-developing team, and so on and so forth. Having a rare advantage can help you become superior sooner. And usually, having a rare advantage is like having that secret ingredient in the recipe-Something, that no one can get a hack of.

You can learn these different perspectives by studying your competition analysis with a detailed overview, gaining better knowledge of the market, brainstorming with your team, and being intuitive with respect to your business.

Steps to derive Competitive Advantages

• Determine the right competition
• Understand your market situation and your position in it
• SWOT Analysis
• Porter’s Five Forces
• Strategic Group Analysis
• Growth-Share Matrix
• Perceptual Mapping
• Figure out the points where you stand out from your competition.
• Those stand-alone points are your competitive advantages.

A table for listing your Competitive Advantages:

Add competitive advantage to your business plan.

Your competitive advantage section will come after you have explained your competition.

In the beginning, you have to explain the competitive environment. If you are going to put it next to the section on competitive analysis, you will not have to go into details. Because you will already have explained those details.

However, if you are to present this section only, you will have to explain your competition . Along with that, you will also have to share analytic comparisons. For this, you can use pie charts, graphs, metrics, and other such diagrams.

And then, finally, you have to start explaining your competitive advantage over your competitors. Note that you have to write this section in the most convincing way. So, your prospects understand your dynamics well and invest in your business. Moreover, it is important for them to know if you have a clear strategic plan to run your business successfully.

A lot of people may want to skip this section of your business plan. But in our opinion, you must never make that mistake. For it is your chance to tell your investors the ways you stand out from your competitors in your industry.

Important of Competitive Advantages

• You get a chance to highlight your business’s strengths and opportunities
• Your investors can have an idea that you have crystal clear ways to thrive in your business
• You restore your investors’ faith in you.
• You explain why your business would be their best choice to invest in.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

About the Author

Since childhood, I was in awe of the magic that words bring. But while studying computer science in college, my world turned upside down. I found my calling in being a copywriter and I plunged into a world of words. Since then, there is no looking back. Even today, nothing excites me to find out the wonders the words can bring!

Related Articles

How to Write Competitive Analysis in a Business Plan (w/ Examples)

5 Types Of Competitive Analysis Frameworks

What is SWOT Analysis & How to Conduct it

Reach your goals with accurate planning.

No Risk – Cancel at Any Time – 15 Day Money Back Guarantee

Popular Templates

We earn commissions if you shop through the links below.  Read more

How to Write the Competitive Analysis for Your Business Plan

Back to Business Plans

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on February 19, 2023 Updated on December 12, 2023

Starting a business usually involves countless tasks, and one of the most important early hurdles is writing a business plan . Many entrepreneurs who aren’t looking for funding think they can skip this step, but that’s never a good idea. 

A crucial element of the business plan is the competitive analysis, mainly because only by understanding your competition will your company be able to beat them.

Fortunately for you, this handy guide lays out all you need to know to whip up an excellent competitive analysis that’s sure to give you a serious advantage. 

• What is a Competitive Analysis?

A competitive analysis describes your competitors and their products or services and identifies their strengths and weaknesses and competitive advantages. Writing the analysis involves detailed research and an examination of your competitors, their strategies, and their customers.

The goal is to identify how your business can gain a competitive advantage, usually by capitalizing on competitors’ weaknesses or beating them in a particular area, such as price or customer service.

A competitive advantage is critical to the success of your business, and something investors tend to focus on, so be sure to do your homework to determine yours.

• Steps to Write a Competitive Analysis

Writing a competitive analysis involves several steps.

1. Identify your top competitors

First, identify 5-10 competitors. They can be direct or indirect competitors. Direct competitors sell the same or similar products, while indirect competitors sell different products that solve the same problem. Burger King is McDonald’s direct competitor, for instance, while Chipotle is an indirect competitor.  

A good competitive analysis begins with a brief overview of each competitor.

2. Research your competitors

Next, research those competitors to find out more about what they offer, how they offer it, and to whom. You can get this info on the company’s websites, social media, marketing, and any news and financial reporting.  

Their marketing should help you to identify their value proposition and their target market . It may help to study their marketing through the eyes of a consumer. 

What need do they fill? Who would find their marketing appealing? Where do they advertise? If their ads appear on TikTok, they’re looking to attract a younger market. 

Read customer reviews to learn more about what they’re doing right, and more importantly, areas in which they fall short. You might even want to buy some of your competitors’ products, which would certainly help you with the next section of the plan. 

3. Compare products

Now it’s time to thoroughly compare your competitors’ products to your own, examining the features and uses, as well as pricing, quality, and market placement.  

This should show you how your product stacks up and give you ideas about how to improve it, perhaps with new features or added options.  

4. Identify competitor strengths and weaknesses

By now you should be able to identify the strengths and weaknesses of your competitors. What do they do well? Where do they fall short? In your competitor summaries, list the strengths and weaknesses of each. 

5. Identify competitor competitive advantages

At this point you should know each competitor’s competitive advantage. What is their key differentiator? How does their product stand out? A competitive advantage is usually one of the following:

• Customer service
• Brand awareness
• Technology 
• Convenience
• Rapid innovation
• Unique features
• High quality 
• Corporate social responsibility
• Empathetic marketing
• Eco-friendliness
• Employee expertise

6. Determine your competitive advantage

Now we get to the whole point the competitive analysis – figuring out where your business can gain an advantage. What does your company offer that they don’t? What can you do better than they do? Review the above list of competitive advantages – does any of them jump out to you? 

It could be something your business already does or has, or something you need to implement to gain an edge. Either way, it’s critical that you identify at least one differentiator that’s likely to persuade customers to choose your business. 

• Structure Your Competitive Analysis

As previously mentioned, your competitive analysis should be structured as a series of summaries about each competitor and how your company compares. It might help to create a chart or table to illustrate your main points and findings. 

Each summary should mention the key product features as well as strengths, weaknesses, and competitive advantage. Conclude the plan by explaining your competitive advantage, as well as how you will leverage it and sustain it. 

Sounds like a lot of work, right? And this is just one part of your business plan! 

A great deal of effort and research goes into a good competitive analysis, which highlights the complexity, and the importance, of writing a business plan. It’s a lot of work, but also a fantastic learning opportunity that will help develop informed strategies that shape your business. 

Even if you’re not seeking funding, take the time to write a solid business plan and be sure to dig into the competitive analysis. After all, finding and embracing your business’ competitive advantage is likely to be one of the keys to your success. 

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Subscribe to Our Newsletter

Featured resources.

Crafting the Perfect Business Plan: A Deep Dive with Upmetrics’ Vinay Kevadiya

Carolyn Young

Published on October 13, 2023

In the first segment of our conversation with Vinay Kevadiya, the visionary behind Upmetrics, we explored the platform’s origins and itsunique ...

LivePlan Software Review

Published on September 15, 2023

When you’re starting a business, a business plan is essential whether you’re going to obtain financing or not. Creating a business plan helpsyou ...

What to Include in Your Business Plan Appendix?

Published on September 13, 2023

Launching a business involves countless tasks, and one of the crucial early hurdles is writing a business plan. Many entrepreneurs who aren’tlooki ...

No thanks, I don't want to stay up to date on industry trends and news.

How to Successfully Achieve and Sustain Competitive Advantage

Updated on: 5 January 2023

Competitive advantage is at the core of an organization’s performance in markets where there is heavy competition. It sets an organization apart from its competitors and paves the way for higher profit margins, greater return on assets, and accumulating valuable resources.  

There are many ways to achieve a competitive advantage but only two basic types of it. In this post, we will be looking at the concept of competitive advantage and the steps an organization can follow to achieve and sustain competitive advantage through cost advantage and differentiation. 

What is Competitive Advantage

Competitive advantage stems from the value an organization is able to create for its customers. It can come in the form of prices lower than what is offered by competitors for the same benefits or in the form of unique benefits that counterbalance a higher price. In the end, the value created for the customer should exceed the organization’s cost of creating it in the first place. 

This creates a sustainable advantage allowing them to succeed in the market. 

According to Michael Porter, there are two types of competitive advantage; 

• Low cost – where an organization is able to produce its products at a lower cost than its competitors.
• Differentiation – where an organization is able to differentiate its products or service in terms of quality, style, customer service, etc. hence creating superior value to the customers over the competition. 

Cost advantage and differentiation stems from industry structure or how well it can cope with the industry forces that influence its profitability (as introduced in Michael Porter’s five forces model ) better than its competition. 

How to Create and Sustain Competitive Advantage 

Creating a sustainable competitive advantage is a laborious process that needs to be continuously attended to. Adhere to the following steps to ensure you get and remain ahead of the field.   

Analyze Competitors 

To successfully compete in an industry, an organization needs to understand its competitive landscape. This means gathering and analyzing information on competitor strengths, weaknesses, strategies, positioning, value proposition, customer perception, and more.  

Equipped with this knowledge, the right strategy can then be developed to achieve a sustainable competitive advantage.  

Learn more about conducting a competitive analysis . 

Map Competitors into Strategic Groups 

A business mainly competes against other businesses that offer similar products or services and follow the same generic competitive strategy. Such businesses that follow the same competitive strategy in an industry belong to the same strategic group. Identifying the other businesses that fall into the same strategic group as it does, is important to an organization in terms of developing a strategy to achieve competitive advantage. 

Learn more about mapping strategic groups .  

Assess the Most Attractive Position in the Industry 

Based on your strategic group analysis, you now know who your direct rivals are and where they stand. Next, you should articulate your position in the industry to succeed in the marketplace. Defining your competitive positioning will help identify areas of opportunity for your business. 

Michael Porter’s five forces analysis helps assess and evaluate the competitive strength and position of an organization. Porter’s five forces model helps organizations understand the intensity of competition in an industry, its attractiveness, and profitability level. It helps identify where power lies in a business situation and hence assess the strength of an organization’s current competitive position and the strength of a position that an organization may look to move into.

The five forces include, 

• The entry of new competitors
• The threat of new substitutes 
• The bargaining power of buyers 
• The bargaining power of suppliers 
• The rivalry among the existing competitors 

Three Generic Strategies for Achieving Competitive Advantage by Michael Porter 

An organization’s relative position in an industry decides whether its profitability is above or below the industry average. Even within an industry structure that is unfavorable, a well-positioned organization may earn high rates of return. 

Michael Porter introduces three generic strategies for achieving above-average performance in an industry and thus creating a competitive advantage. Generic strategies include cost leadership, differentiation, and focus which is divided into cost focus and differentiation focus.   

The idea behind the concept of generic strategies is that competitive advantage is at the core of any strategy. And in order to achieve a competitive advantage, the organization must make a choice about the type of competitive advantage it wants to attain and the scope within which it will attain it. 

Each of the generic strategies highlights different methods competitive advantage can be achieved.  

Cost leadership  

An organization adhering to this strategy aims to become the low-cost producer in its industry. The sources of cost advantage vary here from industry to industry, and may include proprietary technology, preferential access to raw material, increased individual skills, improved organizational routines, location advantages, managerial effectiveness, and more .  

A low-cost producer must find and exploit all these sources of cost advantage. An organization that can achieve and sustain overall cost leadership, can become an above-average performer in its industry given that it can command prices at or near the industry average. 

By offering their products or services for a similar or lower price than their competitors, organizations following this strategy can maintain a low-cost position in their industry which will, in turn, increase their return. 

A cost leader however needs to consider the bases of differentiation, for if the product is not perceived as comparable or acceptable by its buyers, it will be forced to reduce prices well below its competitors to gain sales. This will in turn reverse the benefits of its favorable cost position. 

Differentiation

An organization that follows this strategy aims to become unique in its industry along certain dimensions that are highly valued by buyers. In this strategy, the organization selects specific attributes that are considered important by its buyers and uniquely positions itself to meet those needs. It is then rewarded for its uniqueness with premium prices. 

An organization can achieve differentiation through the product itself (quality, price, durability), its delivery system, marketing approach, customer service, and many other factors. The logic behind the differentiation strategy requires that the attributes an organization chooses to differentiate itself should be different from the attributes used by its rivals. 

An organization that can achieve and sustain differentiation can be an above-average performer in its industry if the premium price they offer can offset the extra costs spent for being unique. An organization aiming to become a differentiator therefore should adhere to ways of differentiating that lead to a price premium greater than the cost of differentiating. 

A differentiator shouldn’t ignore its cost position for there’s a chance of its premium prices being nullified by the inferior cost position of competitors. To overcome this, a differentiator can reduce costs in all areas that don’t affect differentiation. 

Focus 

An organization following this strategy selects a segment of the industry and tailors its strategy to cater specifically to them while excluding the rest of the market. By optimizing its strategy for a selected group of customers, the focuser aims to achieve a competitive advantage in its target segment although it cannot achieve an overall competitive advantage. 

The focus strategy has two variants; 

Cost focus: here, the organization seeks a cost advantage in its target segment by exploiting its cost behavior  

Differentiation Focus: here, the organization seeks differentiation in its target segment by exploiting the special needs of the buyers

How to Measure and Analyze Competitive Advantage 

The value chain model by Michale Porter can be used as a tool to diagnose competitive advantage and find ways to improve it. The value chain divides an organization into the distinct activities it performs in designing, producing, marketing, and distributing its products and helps identify the linkages among the activities that are central to achieving competitive advantage. 

Porter’s value chain model divides these activities into two categories,

• Primary activities are the activities involved in the physical creation of the product, its sale and transfer to the buyers, and after-sale assistance. 
• Support activities ; these are the activities that support the primary activities and each other by providing purchased inputs, technology, human resources, and various organization-wide functions.  

The value chain analysis helps understand the activities that are most valuable and should be optimized to achieve competitive advantage.The firm can then optimize the primary activities that account for the greatest share of production costs and increase profit margins. The analysis can also reveal the support activities that could use more spending to generate better value.

Analyzing competitive advantage 

Here’s how to analyze your organization’s value chain based on how you want to develop a competitive advantage (cost leadership or differentiation). 

Cost leadership 

In order to reduce the cost of internal business activities, 

• First, identify the primary and support activities involved in developing and delivering products and services. 
• Determine the importance of each activity in terms of production cost. Those activities that consume a large percentage of the total cost of production should be addressed first. 
• Identify the cost drivers behind each activity by analyzing how they use the company resources. 
• Map out the connections between the activities to better understand the roles each plays in the overall value chain. This will allow you to detect problems such as how reducing the cost of one activity would cause the cost of a linked activity to increase. 
• Now that you have understood the cost drivers and the inefficient processes in the value chain, you can make informed decisions on how to improve them and reduce production cost.

Differentiation   

An organization following a differentiation strategy can effectively create more value for the buyer by adding product features and improving customer satisfaction by following the steps below.

• Identify the activities in the value chain that contribute the most to creating customer value.  
• Evaluate the differentiation strategies for improving customer value. Strategies like adding more product features , improving customer service and responsiveness, and offering complementary products can be used to increase product differentiation and product value.
• Identify the best sustainable differentiation. Creating superior differentiation and customer value requires the use of many interrelated activities and strategies. Use the best combination of them to pursue a sustainable differentiation advantage.  

Now It’s Your Turn to Develop a Competitive Advantage Strategy 

To gain a competitive advantage is to attract more customers, make more profit, return more value to shareholders than rival organizations do. A company can effectively gain a competitive advantage in one of two ways; by reducing its own costs and by adding more value to its products or services hence differentiating itself from competitors. 

We hope this post will assist you in developing your own strategy to achieve a sustainable competitive advantage. Got anything to add? Let us know in the comments below. 

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

More Related Articles

Leave a comment Cancel reply

Please enter an answer in digits: seven − 6 =

Download our all-new eBook for tips on 50 powerful Business Diagrams for Strategic Planning.

.css-s5s6ko{margin-right:42px;color:#F5F4F3;}@media (max-width: 1120px){.css-s5s6ko{margin-right:12px;}} Discover how today’s most successful IT leaders stand out from the rest. .css-1ixh9fn{display:inline-block;}@media (max-width: 480px){.css-1ixh9fn{display:block;margin-top:12px;}} .css-1uaoevr-heading-6{font-size:14px;line-height:24px;font-weight:500;-webkit-text-decoration:underline;text-decoration:underline;color:#F5F4F3;}.css-1uaoevr-heading-6:hover{color:#F5F4F3;} .css-ora5nu-heading-6{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;-webkit-box-pack:start;-ms-flex-pack:start;-webkit-justify-content:flex-start;justify-content:flex-start;color:#0D0E10;-webkit-transition:all 0.3s;transition:all 0.3s;position:relative;font-size:16px;line-height:28px;padding:0;font-size:14px;line-height:24px;font-weight:500;-webkit-text-decoration:underline;text-decoration:underline;color:#F5F4F3;}.css-ora5nu-heading-6:hover{border-bottom:0;color:#CD4848;}.css-ora5nu-heading-6:hover path{fill:#CD4848;}.css-ora5nu-heading-6:hover div{border-color:#CD4848;}.css-ora5nu-heading-6:hover div:before{border-left-color:#CD4848;}.css-ora5nu-heading-6:active{border-bottom:0;background-color:#EBE8E8;color:#0D0E10;}.css-ora5nu-heading-6:active path{fill:#0D0E10;}.css-ora5nu-heading-6:active div{border-color:#0D0E10;}.css-ora5nu-heading-6:active div:before{border-left-color:#0D0E10;}.css-ora5nu-heading-6:hover{color:#F5F4F3;} Read the report .css-1k6cidy{width:11px;height:11px;margin-left:8px;}.css-1k6cidy path{fill:currentColor;}

• Project planning |
• How to create a competitive analysis (w ...

How to create a competitive analysis (with examples)

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.

Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up. 

What is a competitive analysis?

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. 

Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape. 

What to include in a competitive analysis

The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:

A description of your company’s target market

Details about your product or service versus the competitors’

Current and projected market share, sales, and revenues

Pricing comparison

Marketing and social media strategy analysis

Differences in customer ratings

You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.

How to do a competitive analysis

Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.

1. Create a competitor overview

In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.

Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.

2. Conduct market research

Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .

Primary market research may include: 

Purchasing competitors’ products or services

Interviewing customers

Conducting online surveys of customers 

Holding in-person focus groups

Secondary market research may include:

Examining competitors’ websites

Assessing the current economic situation

Identifying technological developments 

Reading company records

Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website. 

3. Compare product features

The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:

Service offered

Age of audience served

Number of features

Style and design

Ease of use

Type and number of warranties

Customer support offered

Product quality

Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.

4. Compare product marketing

The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan . 

Areas you’ll want to analyze include:

Social media

Website copy

Press releases

Product copy

As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:

What story are they trying to tell?

What value do they bring to their customers?

What’s their company mission?

What’s their brand voice?

Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics. 

5. Use a SWOT analysis

Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.

During a SWOT analysis, ask yourself:

What do we do well?

What could we improve?

Are there market gaps in our services?

What new market trends are on the horizon?

Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.

6. Identify your place in the market landscape

The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market. 

For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors. 

This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape. 

Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short. 

Competitive analysis example

Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:

Step 1: Use Google to compile a list of your competitors. 

Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company. 

Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses. 

Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence. 

After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out. 

You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.

Drawbacks of competitive analysis

There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner. 

Don’t forget to take action

You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .

Be wary of confirmation bias

Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.

Update your analysis regularly

A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times. 

Boost your marketing strategy with competitive analysis

Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.

Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.

Related resources

Unmanaged business goals don’t work. Here’s what does.

How Asana uses work management to drive product development

How Asana uses work management to streamline project intake processes

How Asana uses work management for smoother creative production

• Starting a Business
• Growing a Business
• Small Business Guide
• Business News
• Science & Technology
• Money & Finance
• For Subscribers
• Write for Entrepreneur
• Entrepreneur Store
• United States
• Asia Pacific
• Middle East
• South Africa

Copyright © 2024 Entrepreneur Media, LLC All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media LLC

• How to Use Your Business Plan Most Effectively
• The Basics of Writing a Business Plan
• 12 Reasons You Need a Business Plan
• The Main Objectives of a Business Plan
• What to Include and Not Include in a Successful Business Plan
• The Top 4 Types of Business Plans
• A Step-by-Step Guide to Presenting Your Business Plan in 10 Slides
• 6 Tips for Making a Winning Business Presentation
• 12 Ways to Set Realistic Business Goals and Objectives
• 3 Key Things You Need to Know About Financing Your Business
• How to Perfectly Pitch Your Business Plan in 10 Minutes
• How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
• How to Fund Your Business Using Banks and Credit Unions
• How to Fund Your Business With an SBA Loan
• How to Fund Your Business With Bonds and Indirect Funding Sources
• How to Fund Your Business With Venture Capital
• How to Fund Your Business With Angel Investors
• How to Use Your Business Plan to Track Performance
• How to Make Your Business Plan Attractive to Prospective Partners
• Is This Idea Going to Work? How to Assess the Potential of Your Business.
• When to Update Your Business Plan
• How to Write the Management Team Section to Your Business Plan
• How to Create a Strategic Hiring Plan
• How to Write a Business Plan Executive Summary That Sells Your Idea
• How to Build a Team of Outside Experts for Your Business
• Use This Worksheet to Write a Product Description That Sells
• What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
• How to Raise Money With Your Business Plan
• Customers and Investors Don't Want Products. They Want Solutions.
• 5 Essential Elements of Your Industry Trends Plan
• How to Identify and Research Your Competition
• Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
• How to Identify Market Trends in Your Business Plan
• How to Define Your Product and Set Your Prices
• How to Determine the Barriers to Entry for Your Business
• How to Get Customers in Your Store and Drive Traffic to Your Website
• How to Effectively Promote Your Business to Customers and Investors
• What Equipment and Facilities to Include in Your Business Plan
• How to Write an Income Statement for Your Business Plan
• How to Make a Balance Sheet
• How to Make a Cash Flow Statement
• How to Use Financial Ratios to Understand the Health of Your Business
• How to Write an Operations Plan for Retail and Sales Businesses
• How to Make Realistic Financial Forecasts
• How to Write an Operations Plan for Manufacturers
• What Technology Needs to Include In Your Business Plan
• How to List Personnel and Materials in Your Business Plan
• The Role of Franchising
• The Best Ways to Follow Up on a Buisiness Plan
• The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
• How to Hire the Right Business Plan Consultant
• Business Plan Lingo and Resources All Entrepreneurs Should Know
• How to Write a Letter of Introduction
• What To Put on the Cover Page of a Business Plan
• How to Format Your Business Plan
• 6 Steps to Getting Your Business Plan In Front of Investors

How to Identify and Research Your Competition Emphasizing your competitive advantage is an essential part of any business plan.

By Eric Butow • Oct 27, 2023

Key Takeaways

• Why competitive analysis matters
• Questions to ask about your industry
• How to find similar companies

Opinions expressed by Entrepreneur contributors are their own.

This is part 2 / 8 of Write Your Business Plan: Section 4: Marketing Your Business Plan series.

Successful entrepreneurs are renowned for intuitively feeling a market's pulse, project trends before anyone else detects them, and identifying needs that even customers are unaware of. After you are famous, perhaps you can claim a similar psychic connection to the market. But for now, you'll need to reinforce your claims to market insight by presenting solid research in your plan.

Market research aims to understand the reasons consumers will buy your product. It studies consumer behavior, specifically how cultural, societal, and personal factors influence that behavior. For instance, market research aiming to understand consumers who buy in-line skates might study the cultural importance of fitness, the societal acceptability of marketing directed toward children and teens, and the effect of personal influences such as age, occupation, and lifestyle in directing a skate purchase.

Related: 4 Effective Ways To Accomplish This Missing Step That Most Entrepreneurs Overlook

Market research is often split into two varieties: primary and secondary. Primary research studies customers directly, whereas secondary research studies information others have gathered about customers. Primary research might be telephone interviews or online polls with randomly selected target group members. You can also study your own sales records to gather primary research. Secondary research might come from reports on other organizations' websites or blogs about the industry.

Conducting market research provides answers to those unknown elements. It will greatly reduce risk as you start your business. It will help you understand your competitive position and the strengths and weaknesses of your competitors. And it will improve your marketing and sales process."

Related: You Need Consumer Insights To Ensure The Success Of Your Business. Here Are Five Ways To Find Them.

Questions to Ask About Your Industry

To start preparing your industry analysis and outlook, dig up the following facts about your field:

• What is your total industry-wide sales volume? In dollars? In units?
• What are the trends in sales volume within your industry?
• Who are the major players and your key competitors? What are they like?
• What does it take to compete? What are the barriers to entry?
• What technological trends affect your industry?
• What are the main modes of marketing?
• How does government regulation affect the industry?
• In what ways are changing consumer tastes affecting your industry?
• What are recent demographic trends affecting the industry?
• How sensitive is the industry to seasons and economic cycles?
• What are key financial measures in your industry (average profit margins, sales commissions, etc.)?

Related: 5 Essential Elements of Your Industry Trends Plan

How to Find Similar Companies

Find a close match when looking at comparable businesses (and their data). For comparative purposes, consider:

• Companies of relative size.
• Companies serving the same geographic area could be global if you plan to be a web-based business.
• Companies with a similar ownership structure. If you are two partners, look for businesses run by a couple of partners rather than an advisory board of twelve.
• Relatively new companies. While you can learn from long-standing businesses, they may be successful today because of their twenty-five-year business history and reputation.

You will want to use the data you have gathered to determine how much business you could do and to figure out how you will fit into and adapt to the marketplace.

Related: How to Make Your Business Stand Out

How To Do Original Research

One limitation of in-house market information is that it may not include exactly what you're looking for. For instance, if you'd like to consider offering consumers financing for their purchases, it's hard to tell how they'd like it since you don't already offer it.

You can get around this limitation by conducting original research—interviewing customers who enter your store, for example, or counting cars that pass the intersection where you plan to open a new location—and combining it with existing data. Follow these steps to spending your market research dollars wisely:

Determine what you need to know about your market. The more focused the research, the more valuable it will be.

• Prioritize the results of the first step. You can't research everything, so concentrate on the information that will give you the best (or quickest) payback.
• Review less expensive research alternatives. Small Business Development Centers and the Small Business Administration can help you develop customer surveys. Your trade association will have good secondary research. Be creative.
• Estimate the cost of performing the research yourself. Keep in mind that with the internet you should not have to spend a ton of money. If you're considering hiring a consultant or a researcher, remember this is your dream, these are your goals, and this is your business.
• Don't pay for what you don't need.

Related: The One Simple Task That Will Help Your Startup Succeed

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

Successfully copied link

• Money Matters
• Life Stages
• Making Change
• About this blog
• Privacy policy
• Terms of use

© 2024 Vancouver City Savings Credit Union

Sign up for Vancity Connects to receive emails about relevant finance news, events, special offers and research from time-to-time.

Business plan tips: how to identify your competitive advantage

Morgan Beall October 23, 2017

                        Morgan Beall October 23, 2017

At Vancity, we see hundreds of business plans each year from new and aspiring entrepreneurs. And from that experience, we know there are five areas in the business plan that entrepreneurs may not spend enough time on: business objective , SWOT analysis , cash flow projection , competitive advantage and market potential .

In this series, I’m going to share some tips on each of these five areas to get your business plan in top shape. In this post, I’ll cover ways to identify your competitive advantage.

Competitive advantage

What makes your business special? What are you doing differently than your competitors? Why should customers choose your product or service? These are the questions you should ask yourself when determining your competitive advantage. It’s something that often gets overlooked in many business plan s , but understanding your competitive advantage is a huge factor in starting and running a successful business.

https://youtube.com/watch?v=Nid9Frjiz3w

These three steps will help you realize what sets you apart from the rest:

1. Identify your competitors

Start by making a list of your direct and indirect competitors. Not sure who they are? Direct competitors are businesses that satisfy a similar need that you fulfill. Try Google searches and check online business listings in your area. If you are planning on setting up a physical location, walk the community around where your business will be. Even if there don’t appear to be other businesses directly competing with you, there are always other businesses competing for your customer’s time and money. Ask yourself who they are and what products or services are they selling?

2. Find their strengths and weaknesses

Identify what your competitors are doing right. Do a little research to determine what hooks people on their product or service. Next, identify what they’re doing wrong. What’s keeping people from shopping with them? What turns customers off? Make time in your calendar to observe and take notes, or go online and check out website, product and service reviews and see what past customers have had to say.

3. Figure out your “special ingredient”

Lastly, use the information you learned about your competitors to determine your own “special ingredient.” What makes your business stand out? Think about how your values align with your audience, your branding, story, and who you are as a business owner. Consider your customer service, the quality of your products, and where you source your materials from. You may have one very obvious special ingredient, or you may find you have a few special ingredients.

In essence, your competitive advantage is a compelling argument for why a customer should buy your product or service over someone else’s. It’s a vital part of your business plan that helps a financial institution, and your future customers, decide to invest in YOU.

Looking for more support?

Looking for more support to help you complete your business plan? Find out when our next Each One, Grow One small business workshop is happening. The workshop is offered free for members and non-members, and are a great starting place to create your perfect business plan.

Related posts

Business plan tips: how to clarify your business objective, business plan tips: why you need a swot analysis.

• Business plan tips: how to plan a cash flow projection
• Business plan tips: how to figure out your market potential

Related Posts

SRI 101: What is socially responsible investing?

8 tips to make tax filing easier this tax season.

How a blended mortgage interest rate can save you money during uncertain market conditions.

• Was this helpful?
• Yes     No

Related stories

Morgan Beall

Business plan tips: how to figure our your market potential

• LinkedIn icon LinkedIn
• Instagram icon Instagram
• Twitter icon Twitter

Establishing a Competitive Edge for Your Business

There’s a shared understanding for every small business owner: today’s market is packed, and standing out is no small feat. The digital era has opened doors for many, but it’s also crowded the room. So, how do you make your mark? How do you ensure your business isn’t just another name in a long list? The answer is simpler than you might think: you need to define your competitive edge. This article will break down the essence of a competitive edge, its importance in today’s market, and practical steps to carve out your unique space. Let’s explore how to elevate your business above the rest.

What is a Competitive Edge in Business?

Essentially, a competitive edge is what sets your business apart from the rest. It’s that unique factor, or combination of factors, that makes customers choose you over someone else. But let’s be clear: it’s not just about having the best product on the shelf or the most advanced service in the industry. While those are important, a competitive edge dives deeper.

For small businesses, a competitive edge often intertwines with their story, values, and the personal touch they bring to the table. It’s about understanding your customers so well that you can anticipate their needs, even before they do. It’s the trust you build over time, the reputation you cultivate, and the consistent value you deliver.

Think of it this way: two coffee shops might serve equally delicious brews, but one has baristas who remember your name and your favorite order. That personal touch, that extra effort, becomes their competitive edge.

Elements that Make Up a Competitive Edge

In the quest to stand out, businesses often struggle with the question: “What truly sets us apart?” This section will explore the various factors that help businesses differentiate themselves from the competition. These elements touch on the very essence of what your business represents and how it resonates with your audience. 

Unique Selling Proposition (USP)

A Unique Selling Proposition is the backbone of your brand’s promise to its customers. It answers the pivotal question: Why should a customer choose you over the competition?

For example, imagine a local bookstore trying to make its mark in a world where online giants dominate. This bookstore might not compete in terms of volume or discounts. However, it offers curated reading events, author interactions, and a personalized book recommendation service. Here, the USP is about offering a unique reading experience and fostering a community of avid readers.

A well-defined USP helps guide every business decision, from product development to marketing strategies. When your entire team understands and believes in your USP, it ensures consistency in how your brand is presented and perceived. Plus, it helps cultivate customer loyalty.  When people resonate with what you stand for, they are more likely to become advocates for your brand. They’ll choose you over competitors because they truly believe in what you offer. 

Expert Digital Strategy

These days, simply having an online presence isn’t enough. What’s crucial is how you leverage this presence. This is where having an expert digital strategy comes into play.

A digital strategy is a comprehensive plan that aligns with your business goals and speaks to your target audience’s needs. It’s about understanding who your customers are, where they spend their time online, and how you can best reach and resonate with them. It’s not about chasing every digital trend but rather focusing on what genuinely adds value to your audience.

A well-executed digital strategy boosts your online visibility and enhances customer loyalty. As a result, it becomes a pivotal component of your distinct competitive edge.

Memorable Brand Identity

A brand is the consistent message of value a business communicates to its ideal client. This message is conveyed in various ways. From the design of your website to the content you share, every touchpoint should echo this core message. A well-structured, user-friendly website serves as the digital face of your brand, often making the first impression.

Content, whether it’s a blog post, a video, or a tweet, is the voice of your brand. It’s where you articulate your expertise, share insights, and engage with your audience. Every piece of content should be a reflection of the value you promise, further solidifying your brand’s message in the minds of your ideal clients. This ensures that every interaction a client has with your brand reinforces the value you offer, giving you an edge over your competitors.

Trust as an Industry Authority

With so many options at their fingertips, today’s consumers aren’t just looking for good services– they’re seeking businesses they can rely on. Establishing trust is essential, and one of the most effective ways to achieve this is by positioning yourself as an authority in your industry.

Being seen as an industry authority means you’re a go-to source for insights, expertise, and solutions. Your online presence plays a pivotal role in this. A well-maintained website, active social media profiles, and regular engagement with your audience can set the stage for trust. But it’s the content you share that truly cements your position as an authority. Insightful blog posts, informative videos, and timely updates showcase your expertise and commitment to staying updated.

Moreover, content that addresses common client concerns or provides industry insights can position your business as a thought leader. Once again, it’s about adding value to your audience, helping them navigate challenges, and making informed decisions. This is another competitive advantage that’s hard to beat.

Cultivating Your Competitive Edge

Building a competitive edge is a journey, and every journey benefits from expert guidance. That’s where Vervology comes in: with years of experience and a track record of proven results, they offer strategies designed for small businesses eager to make their mark in the digital world.

Of course, nothing is more convincing than real-world success. Check out Vervology’s case study with Reflections Management and Care to see the transformative impact of a well-honed competitive edge.

And if you’re ready to take the next step, reach out to Vervology today. Let’s turn your vision into a success story.

Get in Touch

How can we help you?

Let’s discuss how to build your unique digital footprint.

The Leading Source of Insights On Business Model Strategy & Tech Business Models

Competitive Edge

A competitive edge is a unique advantage that propels an organization past rivals. It encompasses traits like innovation and cost leadership, with examples like Apple and Walmart showcasing its power. However, sustaining this edge poses challenges in a dynamic market, necessitating adaptable strategies and impactful marketing efforts.

Table of Contents

Characteristics of Competitive Edge:

• Uniqueness : Competitive edge hinges on distinctiveness, setting an organization apart from competitors.
• Sustainability : It is not easily replicable, making it challenging for rivals to imitate or surpass.
• Strategic : It’s a result of deliberate planning and strategic decisions.
• Dynamic : Competitive edges must adapt to evolving market conditions.

Types of Competitive Edge:

• Innovation : Innovating products, services, or processes can create a competitive edge by meeting unmet needs or providing superior solutions.
• Cost Leadership : Becoming the low-cost producer in an industry can give a competitive edge by offering lower prices to customers.
• Product Differentiation : Creating unique and desirable products or services that stand out in the market.
• Market Positioning : Establishing a strong and favorable position in the minds of consumers, differentiating from competitors.

Benefits of Competitive Edge:

• Market Dominance : Organizations with a competitive edge can capture a larger market share.
• Profitability : The ability to charge premium prices or reduce costs leads to increased profitability.
• Customer Loyalty : It fosters customer loyalty as consumers are drawn to unique offerings.
• Sustainability : It provides a buffer against market fluctuations and economic downturns.

Challenges in Maintaining Competitive Edge:

• Sustainability : Ensuring that the edge remains relevant and valuable over time can be challenging.
• Market Changes : Shifts in consumer preferences, technology, or regulations can quickly erode an edge.
• Rival Actions : Competitors may counter or imitate the edge, requiring ongoing innovation .
• Complacency : Success with a competitive edge can lead to complacency, hindering further innovation .

Implications of Competitive Edge:

• Strategic Focus : It guides an organization’s strategic planning and resource allocation.
• Marketing Strategy : The edge shapes marketing efforts, focusing on highlighting unique attributes.
• Market Expansion : It can facilitate entry into new markets or industries.
• Competitor Response : Competitors will react to attempts to establish or maintain a competitive edge.

Examples of Competitive Edge:

• Apple’s Innovation : Apple’s continuous innovation in design and technology sets it apart in the consumer electronics industry.
• Walmart’s Cost Leadership : Walmart’s ability to offer low prices to consumers through efficient supply chain management and cost control.
• Tesla’s Technological Advancement : Tesla ’s dominance in electric vehicles is driven by technological advancements and unique battery technology.
• Coca-Cola’s Brand Positioning : Coca-Cola’s strong brand positioning and marketing differentiate it in the soft drink market.

Case Studies

• Amazon’s Fulfillment Network : Amazon’s vast and efficient fulfillment network allows for quick and reliable delivery, giving it a competitive edge in the e-commerce industry.
• Google’s Search Algorithm : Google’s search engine algorithm provides more accurate and relevant search results, making it the preferred choice for online search.
• McDonald’s Brand Consistency : McDonald’s maintains a consistent brand image worldwide, offering the same menu items and quality, which has led to a strong global presence.
• Toyota’s Lean Manufacturing : Toyota’s implementation of lean manufacturing techniques reduces waste and enhances efficiency in production, giving it a cost leadership edge in the automotive industry.
• Nike’s Marketing and Branding : Nike’s powerful marketing campaigns and brand image make it a leader in the athletic footwear and apparel market.
• Netflix’s Content Library : Netflix’s extensive library of original content and licensed shows and movies differentiates it as a leading streaming service.
• SpaceX’s Reusable Rockets : SpaceX’s ability to reuse rockets significantly reduces the cost of space exploration, providing a competitive edge in the aerospace industry.
• Zara’s Fast Fashion Model : Zara’s fast fashion approach, with quick turnaround from design to store shelves, keeps it ahead in the fashion retail industry.
• Tesla’s Autonomous Driving : Tesla ’s development of autonomous driving technology sets it apart in the electric vehicle market.
• FedEx’s Global Delivery Network : FedEx’s global logistics and delivery network ensure reliable and timely shipping services, giving it a competitive edge in the courier and logistics industry.
• Disney’s Intellectual Property : Disney’s vast portfolio of intellectual property, including iconic characters and franchises, gives it a strong position in the entertainment industry.
• Facebook’s Social Network : Facebook’s massive user base and network effects make it a dominant player in the social media and advertising space.

Key Highlights

• Differentiation : Competitive edge often stems from offering unique products, services, or features that set a business apart from its competitors.
• Cost Leadership : Achieving a competitive edge through cost leadership involves optimizing operations to reduce costs and offer competitive prices while maintaining quality.
• Innovation : Continuous innovation in products, processes, or technology can provide a significant competitive advantage.
• Market Understanding : Deep knowledge of customer preferences and market trends helps businesses tailor their offerings effectively.
• Brand Strength : Building a strong and recognizable brand can create a competitive edge by fostering customer loyalty.
• Efficient Supply Chain : Streamlining the supply chain and logistics can lead to faster delivery times and cost savings.
• Talent and Skills : Attracting and retaining top talent with essential skills can be a source of competitive advantage.
• Customer Experience : Delivering exceptional customer experiences and service can differentiate a business from its competitors.
• Agility : The ability to adapt quickly to changing market conditions and customer needs is crucial for staying competitive.
• Global Presence : Expanding into international markets can open up new opportunities and diversify revenue streams.
• Data and Analytics : Leveraging data and analytics to make informed decisions and gain insights into customer behavior is becoming increasingly important.
• Sustainability : Environmental and social responsibility initiatives can enhance a company’s reputation and competitive positioning.
• Regulatory Compliance : Ensuring compliance with relevant regulations and industry standards is essential for long-term success.
• Risk Management : Effective risk management strategies can protect a business from unexpected challenges and disruptions.
• Strategic Partnerships : Collaborating with other organizations can provide access to complementary resources and expertise.

Read Next:  Porter’s Five Forces ,  PESTEL Analysis , SWOT ,   Porter’s Diamond Model ,  Ansoff ,  Technology Adoption Curve ,  TOWS ,  SOAR ,  Balanced Scorecard ,  OKR ,  Agile Methodology ,  Value Proposition ,  VTDF Framework .

Connected Strategy Frameworks

ADKAR Model

Ansoff Matrix

Business Model Canvas

Lean Startup Canvas

Blitzscaling Canvas

Blue Ocean Strategy

Business Analysis Framework

Balanced Scorecard

Blue Ocean Strategy 

GAP Analysis

GE McKinsey Model

McKinsey 7-S Model

McKinsey’s Seven Degrees

McKinsey Horizon Model

Porter’s Five Forces

Porter’s Generic Strategies

Porter’s Value Chain Model

Porter’s Diamond Model

SWOT Analysis

PESTEL Analysis

Scenario Planning

STEEPLE Analysis

Main Guides:

• Business Models
• Business Strategy
• Marketing Strategy
• Business Model Innovation
• Platform Business Models
• Network Effects In A Nutshell
• Digital Business Models

More Resources

About The Author

Gennaro Cuofano

Discover more from fourweekmba.

Subscribe now to keep reading and get access to the full archive.

Type your email…

Continue reading

• 70+ Business Models
• Airbnb Business Model
• Amazon Business Model
• Apple Business Model
• Google Business Model
• Facebook [Meta] Business Model
• Microsoft Business Model
• Netflix Business Model
• Uber Business Model

How to Write a Competitive Edge for Business

• Small Business
• Business Communications & Etiquette
• Business Writing
• ')" data-event="social share" data-info="Pinterest" aria-label="Share on Pinterest">
• ')" data-event="social share" data-info="Reddit" aria-label="Share on Reddit">
• ')" data-event="social share" data-info="Flipboard" aria-label="Share on Flipboard">

Outline & Sample of a Marketing Plan

How to write a preface for a business plan, how to write a marketing analysis report.

• What Factors Make the Difference Between a Good Business Plan & an Excellent One?
• Definition of a SWOT Analysis

Establishing your competitive edge is an important part of the feasibility study you do prior to writing your startup business plan or your year-end strategic planning for next year's business expansion. It entails research into your competition, how their products differs from yours, how their operations differ from yours and how their marketing differs from yours. Your research should also include the demographics and buying habits of your target customer so you can identify or create your competitive advantage.

SWOT Analysis

List the qualities of your product, business operations, marketing and customer base. Then list how those qualities compare to your competition and what you can do to best that competitor. Once you have a list of qualities that give you a competitive advantage, perform a SWOT analysis, which is taking each point and determining the strengths, weaknesses, opportunities and threats associated with that product, operational system, marketing campaign or customer base.

Writing a description of your competitive edge, and how you will achieve and maintain it, may require revision and refining of your initial vision. This is why you put in research and evaluation time to identify holes in your planning and fantasies in your decision making prior to writing. Competitive edge is an elusive reality. Self-deception destroys many businesses because it leads you to think you have enough money, time, product superiority, operational superiority and marketing savvy to blow your competition out of the water.

A discussion of your competitive edge can be part of the section of your business plan that deals with the description of your company, or it can be the introduction to your marketing plan. It is also useful as a basis for your brochures, website copy and marketing presentations. Describe your product, and compare its strengths and weaknesses with respect to the competition's products. Then, indicate how your company compares to the competition and what opportunities or threats you have identified. Describe your target customers, their needs and buying habits, and why your product appeals to them. Then indicate your marketing plans for targeting and attracting those customers by educating them about the superiority of your product and services relative to those of your competition.

Reality Check

Always get an outside opinion before you deliver your description to an investor, bank or customer. Organizations such as the Service Corps of Retired Executives, known as SCORE, can provide you with unbiased advice regarding the reality of your assumptions so you have the opportunity to revise your description of your competitive edge, if needed. A clear and factual vision is one of the best competitive edges you can develop.

• Entrepreneur: Market Strategies
• Marketing MO: Competitive Positioning

Victoria Duff specializes in entrepreneurial subjects, drawing on her experience as an acclaimed start-up facilitator, venture catalyst and investor relations manager. Since 1995 she has written many articles for e-zines and was a regular columnist for "Digital Coast Reporter" and "Developments Magazine." She holds a Bachelor of Arts in public administration from the University of California at Berkeley.

Related Articles

Quick step process business plan, how to write a comprehensive business plan, how to pitch a business plan, how to write a business case for action, what does a business plan consist of, how to write a business plan for a sole proprietorship, main steps in business planning, how to write a compelling marketing letter that actually gets read, how to write the perfect business plan, most popular.

• 1 Quick Step Process Business Plan
• 2 How to Write a Comprehensive Business Plan
• 3 How to Pitch a Business Plan
• 4 How to Write a Business Case for Action

Plan Projections

ideas to numbers .. simple financial projections

Home > Business Plan > Competitive Advantage in a Business Plan

Competitive Advantage in a Business Plan

… but we have the following advantages …

A business is creating competitive advantage over its competitors when it can achieve higher the industry average profit margins on its products. This can happen due to a number of factors including cost advantages, and superior product offerings. The main objective of the business is the make the competitive advantage sustainable.

Superior product offerings or differential advantages occur when the business has a product which is perceived by the customers as substantially better than the competitors products.

Even if a competitor were able to make an almost identical product, your competitive advantages should enable the business to win, build and maintain market share in the chosen target market.

Competitive Advantage Examples

Examples of things which might give your business a competitive or unfair advantage include the following:

• First to market
• Barriers to entry
• Available funds and working capital
• Key partnerships and relationships
• Access to expertise, special skills and talents
• Distribution rights

Competitive Advantage Presentation

An investor will look to see if there is a sustained competitive edge, capable of further development, which will allow the business to build and hold market share.

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 sets out details of the market share the business plans to win using its competitive edge.

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 degree from Loughborough University.

You May Also Like

• Case Studies
• Free Coaching Session

How to Keep a Competitive Edge in Business

Last Updated:  

December 29, 2023

If you're ready to take your business to the next level, we've got some tips for you. What are ways I can learn more about my target market? What are good ways to know my business competitors? What are the benefits of having a business coach ?

Key takeaways on keeping an edge in business

• Embrace innovation : Staying ahead of the competition requires continuously exploring new ideas, products, and technologies. Embrace change and encourage creativity within your organisation to drive growth.
• Understand your target market : Conduct regular market research to better understand your customers' needs, preferences, and pain points. This will enable you to tailor your offerings and messaging to resonate with your target audience.
• Prioritise customer satisfaction : Provide exceptional customer service and support to build long-lasting relationships with your clients. Focus on their needs and seek feedback to improve your products and services continually.
• Foster a strong company culture : A positive and inclusive work environment can help attract top talent and retain valuable employees. Encourage teamwork, communication, and professional development to improve overall productivity.
• Monitor your competition : Keep a close eye on your competitors to identify industry trends and stay informed about their strategies, products, and services. This knowledge will help you differentiate your offerings and make informed decisions about your business.
• Invest in employee training and development : Providing regular training and development opportunities will help your team stay up-to-date with industry trends, hone their skills, and remain motivated to perform at their best.
• Optimise your supply chain : Efficient and reliable supply chain management can help reduce costs, minimise risks, and ensure timely delivery of products and services. Build strong relationships with suppliers and monitor their performance to maintain quality standards.
• Leverage data and analytics : Utilise data-driven insights to make informed decisions, identify opportunities for improvement.

Keep your objectives clearly defined

To be competitive, you need to know what you're aiming for and be able to measure your progress. Write down your objectives and make sure they're realistic, you don't want to set yourself up for failure by setting goals that are too high or too low.

You should also make sure that the goal is specific; a vague objective like "I want my business to grow" is not as useful as one like "My sales team will increase their revenue by 20% over the next 12 months." Finally, be mindful of how much time it will take before achieving your objectives so that they remain relevant throughout the year (or whatever time frame works best).

Get in touch with your customers

In order to stay competitive, you need to get in touch with your customers. Listen carefully and ask them what they want from your business, what they need from it, and what they don't like about it currently.

Don't be afraid to ask for help

The first step in keeping a competitive edge is to find the resources that are available to you. There are many free resources, as well as services offered by professionals who charge for their time.

• Look for free resources: Your local library and bookstores may have books about business management, marketing strategies and even financial planning that can help you get started with your new venture. If not, search online for free ebooks or websites offering advice on how to start a business from scratch (or take over an existing one). These resources are especially helpful if they offer step-by-step instructions on what steps need to be taken before opening day; otherwise it could be confusing trying to figure everything out yourself!
• Ask friends and family members who have owned their own businesses before what advice they would give someone starting out today versus back then when these people were first getting started themselves."

Create a barrier to entry

The first step in keeping a competitive edge is to create a barrier to entry for your customers. The more difficult it is for competitors to enter the market, the higher your profits will be. This means that you should do everything possible to make it hard for them to not only compete with you but also copy your product or service and enter into the same market as you.

• Create a unique selling proposition (USP). Your USP should be something that sets you apart from other companies in your industry, such as better quality products or services at lower prices than anyone else offers them at, or even free! By creating this kind of differentiation between yourself and other businesses within similar markets, people will remember why they chose one brand over another when making purchasing decisions later down the line.* Make sure there are no holes in security measures; otherwise someone could easily hack into them.* Update software regularly because older versions aren't secure enough anymore due constant improvements being made by developers over time

Know the competition, and what they're doing right and wrong

If you want to stay competitive in your industry, it's important to know what your competitors are doing. You should know their strengths and weaknesses, what they're doing right and wrong, and how that could affect your business.

Know Your Competition

You should research the other businesses in your field so that you can understand them better: their target market, financial situation and size of business (if applicable). The more information on which companies operate in this space the better equipped you will be when making decisions about how best to grow or run your own operation.

Always plan for the worst-case scenario

One of the biggest mistakes you can make is to assume that everything will go according to plan. You need to be prepared for the unexpected, and planning for worst-case scenarios is one way of doing this. The best way to prepare yourself for potential problems is by creating a list of all possible situations that could arise and thinking about how you will deal with them if they do occur.

Here are some examples:

• You have a meeting scheduled with your boss, but he's out sick today, what do you do?
• Your supplier cancels an order at short notice because they've got busy elsewhere, how does this affect your timeline?
• An employee calls in sick just before his shift starts, what now?

Optimise your supply chain

In today's business world, supply chain is the lifeblood of any organisation. It's the process through which you get your products from point A to point B. Logistics and inventory management are vital components of this process, but so too are transportation and distribution. Once your product has arrived at its destination, warehousing and order fulfillment take over until it's delivered directly into customers' hands, or maybe even onto their doorsteps!

The key thing to remember here is that without an optimised supply chain, there would be no competitive edge for your business at all. In fact, if there was anything holding back your company from achieving maximum success right now then it would almost certainly be due to poor logistics management or insufficient inventory control procedures (or both). You need an effective system in place so that every single aspect of getting things done happens smoothly with minimal effort required by anyone involved, and this includes yourself as well!

Invest in employee training and development

Training and development is an investment in your team's future. How do you know if you need training or business coaching ? You can start by asking yourself these questions:

• Do I have an actionable plan for my business?
• Is my team engaged and motivated to take on projects, or are they dragging their feet because they're bored or don't know what the next steps are?
• Are my employees growing faster than the competition?

If so, then congratulations! Your business probably doesn't need any help from outside sources at this point. But if not (or even if it does), consider investing in employee training and development programs like those offered by Skillsoft University or Skillsoft Academy, both are excellent options for getting started with an online learning platform that will help improve performance across all areas of your organisation, from sales managers who need new tactics for closing deals to customer service reps who want better ways handle complaints over social media channels like Facebook Messenger or Twitter DMs.

With these tips, you'll be able to keep your business running smoothly and efficiently!

• Plan ahead.
• Stay organised.
• Stay on top of things.
• Be flexible and adaptable to change, so you can keep your business running smoothly and efficiently!

If you're having trouble with any of these things, try delegating tasks to someone else who may be able to do them better than you can (or at least differently). It's also important not to get too bogged down in details, it's easy for a small problem or setback to snowball into something much larger than it needs be if we let ourselves get distracted by minor details when there are more pressing matters at hand.

FAQs on keeping a competitive edge

As you navigate the complex world of maintaining a competitive edge in business, it's natural to have questions about the best strategies and practices. In this FAQ section, we address some of the most common queries related to staying ahead of the competition. Dive in to gain a deeper understanding of the key concepts and learn how to effectively implement these tactics within your organisation.

What are ways I can learn more about my target market?

You should have a good understanding of the demographics and psychographics of your target market. This can help you understand what they need, what they want and why they are buying from your company. You should also know their buying habits, media consumption habits and lifestyle choices so that you can better tailor products or services to meet their needs.

If you don't already have access to this information (or if it isn't accurate), consider hiring an outside firm like Nielsen Norman Group or Red Tree Consulting who specialise in user research for digital products such as websites/apps/software applications etc.. They will ask questions about where users live; how old they are; how much money they make per year; whether or not there are kids at home etc.. This will give them insight into the types of devices being used by various demographics which may determine whether someone buys a smartphone over an iPad because one has better battery life while another offers more storage space available immediately after purchase without having to upgrade later on down the line!

What are good ways to know my business competitors?

• Look at their websites
• Follow them on social media
• Check out their business reviews, both online and in print.

Do they have a blog? What is it about? Are they posting regularly, or just occasionally when something big happens in the industry or with their company? How much content do they produce each week/month/year on average? Do they use infographics or videos, or both, and if so, how often do these appear on their site/pages (or not)? Do they post press releases about new products or services being launched by other companies as well as themselves; do these get shared widely by other people within the industry who then link back to those posts from their own sites and social media accounts (or not)?

What are the benefits of having a business coach?

If you have a business coach, they will help to keep you motivated and focused on your goals. They can also help you see things from a different perspective, which can be very beneficial in helping you make the right decisions for your company. A business coach will be able to provide insight into areas of your business that need improvement or development so that the company can continue to grow and thrive in its market space.

What are ways I can outperform my competitors on social media?

Social media can be a powerful tool for businesses, but it's important to understand that there is no one-size-fits-all approach. You have to tailor your strategy based on your business goals.

Here are some ways you can use social media to outperform your competitors:

• Drive traffic to your website by posting links and articles that will help people find what they're looking for on your site. This will increase the number of visitors who click through from Facebook or Twitter, which in turn increases sales conversion rates (when someone buys something).
• Build brand awareness by sharing photos, videos and other content that showcases what makes your company unique in an authentic way so potential customers feel like they know who you are before they ever meet face-to-face with someone from customer service at one of their stores."

As you can see, there are many ways to keep your business competitive. This list is by no means exhaustive, but it should give you some ideas about where to start with your own company. If you need help getting started with any of these activities or questions, don't hesitate!

Related Articles:

Client Success!! Watch THIS >>>

Client Success - Case Study

© 2016 - 2024 Robin Waite. All rights reserved.

• Skip to content.
• Jump to Page Footer.

Webinar: Foreign Investment in 2024

Discover the secrets to prospecting and selecting relevant investors, and unlock the potential of international funding opportunities. Our expert speakers provide invaluable insights on engaging with investors, creating an international investment strategy, and navigating term sheet negotiations.

Defining your competitive edge: Product positioning in your target market

Highlights (click to read).

• It’s critical to create a competitive edge for your product within your target market.
• To distinguish and position your product, be the first in the market and leverage your expertise to establish leadership.
• Work constantly to maintain your competitive edge.
• Quality, customer service and price do not provide a competitive edge.

Define your competitive edge by finding different ways of being unique in the marketplace. By differentiating your product, service, personnel or brand, you can establish a unique position in your market.

In today’s crowded market, many products can more easily mimic each other in terms of their attributes and offered benefits. The following strategies can help to distinguish your offering in the market and create a competitive edge.

Be first in the market

Buyers tend to stay with what they know. By being first to market, you will be able to take advantage of having no competition with your offering (also known as the first-mover advantage). However, it can take time to gain market acceptance of new ideas, and being first does not last forever.

Leverage your expertise: Establish leadership

Being perceived as an expert in your market bestows on you a level of trust, which transfers to your products. You can establish leadership in different areas, such as technology, science or sales. Develop your reputation and expertise with knowledge-sharing activities, such as writing blogs, articles or white papers, or presenting webinars.

Focus your market expertise

Establish your expertise by focusing on one particular niche to develop market specialization. Your market-specific expertise will set you apart from the competition. For example, instead of concentrating on a wide market encompassing all doctors, zero in on a niche within that market, such as pediatricians. This would enable you to specialize in, and appeal to, a pediatrician’s particular needs. Otherwise, your offering may not hold enough appeal to the wider audience to give you an advantage over your competition.

Make your products stand out as new and improved

Study your competitors and learn how they target a market problem. Ensure that the problem is an important one, and that your solution is better. Then reposition this market problem with your own unique solution. You can capitalize on your competitors’ marketing, but make sure to position your product as the“next generation.” For example, when microwave ovens were flooding the market, new entrants adjusted their positioning by marketing their products as “speed cookers” that evenly cooked food, a significant improvement over their microwave counterparts.

Note : By identifying market problems , you might see a problem/solution in a different way than your competitors, which will give you an advantage.

How to maintain your competitive edge

Once you have defined your competitive edge, you must work to maintain that upper hand. Your competitors will constantly work to improve their products and build their expertise, and so should you. Strive to ensure that your product continually solves your customers’ problems in new ways. By focusing on this goal, you can stay ahead of your competitors.

What is not a competitive edge

Avoid focusing on the following areas or characteristics, as they will not set you apart from your competition.

Quality and customer orientation

Although it is important to manufacture good quality products and be customer-oriented, these factors will not set you apart from the competition. Since your product is on the market, the tacit understanding is that the quality is good.

Customer service

It is assumed that you will work diligently to ensure customer satisfaction. This alone will not keep those customers coming back to you. According to Jack Trout, in  Differentiate or Die , it was found that 40% of satisfied customers would change brands without looking back.

Although pricing your products below market price might attract some buyers, it will not differentiate your product for long. Being cheaper than an alternative will not position you as unique. It will place you in a weak position because your competition could change their price to match yours at any time.

Breadth of line

Based on the success of “superstores,” you might be tempted to become“everything to everyone.” However, this is not differentiation. You might solve some problems for some customers, but it is more likely that you will not fully solve any customers’ problems.

Provide a specific solution to ensure that you solve real problems for a specific target market .

Summary: It’s critical to create a competitive edge for your product within your target market and to work hard to maintain this position against your competition.

Product positioning: stress your unique value, positioning: creating an image of your product in your target customer’s mind, product positioning and positioning your startup: customer validation stage, sign up for our monthly startup resources newsletter about building high-growth companies..

• Enter your email *

You may unsubscribe at any time. To find out more, please visit our Privacy Policy .

Small Business Trends

How to create a business plan: examples & free template.

This is the ultimate guide to creating a comprehensive and effective plan to start a business . In today’s dynamic business landscape, having a well-crafted business plan is an important first step to securing funding, attracting partners, and navigating the challenges of entrepreneurship.

This guide has been designed to help you create a winning plan that stands out in the ever-evolving marketplace. U sing real-world examples and a free downloadable template, it will walk you through each step of the process.

Whether you’re a seasoned entrepreneur or launching your very first startup, the guide will give you the insights, tools, and confidence you need to create a solid foundation for your business.

Table of Contents

How to Write a Business Plan

Embarking on the journey of creating a successful business requires a solid foundation, and a well-crafted business plan is the cornerstone. Here is the process of writing a comprehensive business plan and the main parts of a winning business plan . From setting objectives to conducting market research, this guide will have everything you need.

Executive Summary

The Executive Summary serves as the gateway to your business plan, offering a snapshot of your venture’s core aspects. This section should captivate and inform, succinctly summarizing the essence of your plan.

It’s crucial to include a clear mission statement, a brief description of your primary products or services, an overview of your target market, and key financial projections or achievements.

Think of it as an elevator pitch in written form: it should be compelling enough to engage potential investors or stakeholders and provide them with a clear understanding of what your business is about, its goals, and why it’s a promising investment.

Example: EcoTech is a technology company specializing in eco-friendly and sustainable products designed to reduce energy consumption and minimize waste. Our mission is to create innovative solutions that contribute to a cleaner, greener environment.

Our target market includes environmentally conscious consumers and businesses seeking to reduce their carbon footprint. We project a 200% increase in revenue within the first three years of operation.

Overview and Business Objectives

In the Overview and Business Objectives section, outline your business’s core goals and the strategic approaches you plan to use to achieve them. This section should set forth clear, specific objectives that are attainable and time-bound, providing a roadmap for your business’s growth and success.

It’s important to detail how these objectives align with your company’s overall mission and vision. Discuss the milestones you aim to achieve and the timeframe you’ve set for these accomplishments.

This part of the plan demonstrates to investors and stakeholders your vision for growth and the practical steps you’ll take to get there.

Example: EcoTech’s primary objective is to become a market leader in sustainable technology products within the next five years. Our key objectives include:

• Introducing three new products within the first two years of operation.
• Achieving annual revenue growth of 30%.
• Expanding our customer base to over 10,000 clients by the end of the third year.

Company Description

The Company Description section is your opportunity to delve into the details of your business. Provide a comprehensive overview that includes your company’s history, its mission statement, and its vision for the future.

Highlight your unique selling proposition (USP) – what makes your business stand out in the market. Explain the problems your company solves and how it benefits your customers.

Include information about the company’s founders, their expertise, and why they are suited to lead the business to success. This section should paint a vivid picture of your business, its values, and its place in the industry.

Example: EcoTech is committed to developing cutting-edge sustainable technology products that benefit both the environment and our customers. Our unique combination of innovative solutions and eco-friendly design sets us apart from the competition. We envision a future where technology and sustainability go hand in hand, leading to a greener planet.

Define Your Target Market

Defining Your Target Market is critical for tailoring your business strategy effectively. This section should describe your ideal customer base in detail, including demographic information (such as age, gender, income level, and location) and psychographic data (like interests, values, and lifestyle).

Elucidate on the specific needs or pain points of your target audience and how your product or service addresses these. This information will help you know your target market and develop targeted marketing strategies.

Example: Our target market comprises environmentally conscious consumers and businesses looking for innovative solutions to reduce their carbon footprint. Our ideal customers are those who prioritize sustainability and are willing to invest in eco-friendly products.

Market Analysis

The Market Analysis section requires thorough research and a keen understanding of the industry. It involves examining the current trends within your industry, understanding the needs and preferences of your customers, and analyzing the strengths and weaknesses of your competitors.

This analysis will enable you to spot market opportunities and anticipate potential challenges. Include data and statistics to back up your claims, and use graphs or charts to illustrate market trends.

This section should demonstrate that you have a deep understanding of the market in which you operate and that your business is well-positioned to capitalize on its opportunities.

Example: The market for eco-friendly technology products has experienced significant growth in recent years, with an estimated annual growth rate of 10%. As consumers become increasingly aware of environmental issues, the demand for sustainable solutions continues to rise.

Our research indicates a gap in the market for high-quality, innovative eco-friendly technology products that cater to both individual and business clients.

SWOT Analysis

A SWOT analysis in your business plan offers a comprehensive examination of your company’s internal and external factors. By assessing Strengths, you showcase what your business does best and where your capabilities lie.

Weaknesses involve an honest introspection of areas where your business may be lacking or could improve. Opportunities can be external factors that your business could capitalize on, such as market gaps or emerging trends.

Threats include external challenges your business may face, like competition or market changes. This analysis is crucial for strategic planning, as it helps in recognizing and leveraging your strengths, addressing weaknesses, seizing opportunities, and preparing for potential threats.

Including a SWOT analysis demonstrates to stakeholders that you have a balanced and realistic understanding of your business in its operational context.

• Innovative and eco-friendly product offerings.
• Strong commitment to sustainability and environmental responsibility.
• Skilled and experienced team with expertise in technology and sustainability.

Weaknesses:

• Limited brand recognition compared to established competitors.
• Reliance on third-party manufacturers for product development.

Opportunities:

• Growing consumer interest in sustainable products.
• Partnerships with environmentally-focused organizations and influencers.
• Expansion into international markets.
• Intense competition from established technology companies.
• Regulatory changes could impact the sustainable technology market.

Competitive Analysis

In this section, you’ll analyze your competitors in-depth, examining their products, services, market positioning, and pricing strategies. Understanding your competition allows you to identify gaps in the market and tailor your offerings to outperform them.

By conducting a thorough competitive analysis, you can gain insights into your competitors’ strengths and weaknesses, enabling you to develop strategies to differentiate your business and gain a competitive advantage in the marketplace.

Example: Key competitors include:

GreenTech: A well-known brand offering eco-friendly technology products, but with a narrower focus on energy-saving devices.

EarthSolutions: A direct competitor specializing in sustainable technology, but with a limited product range and higher prices.

By offering a diverse product portfolio, competitive pricing, and continuous innovation, we believe we can capture a significant share of the growing sustainable technology market.

Organization and Management Team

Provide an overview of your company’s organizational structure, including key roles and responsibilities. Introduce your management team, highlighting their expertise and experience to demonstrate that your team is capable of executing the business plan successfully.

Showcasing your team’s background, skills, and accomplishments instills confidence in investors and other stakeholders, proving that your business has the leadership and talent necessary to achieve its objectives and manage growth effectively.

Example: EcoTech’s organizational structure comprises the following key roles: CEO, CTO, CFO, Sales Director, Marketing Director, and R&D Manager. Our management team has extensive experience in technology, sustainability, and business development, ensuring that we are well-equipped to execute our business plan successfully.

Products and Services Offered

Describe the products or services your business offers, focusing on their unique features and benefits. Explain how your offerings solve customer pain points and why they will choose your products or services over the competition.

This section should emphasize the value you provide to customers, demonstrating that your business has a deep understanding of customer needs and is well-positioned to deliver innovative solutions that address those needs and set your company apart from competitors.

Example: EcoTech offers a range of eco-friendly technology products, including energy-efficient lighting solutions, solar chargers, and smart home devices that optimize energy usage. Our products are designed to help customers reduce energy consumption, minimize waste, and contribute to a cleaner environment.

Marketing and Sales Strategy

In this section, articulate your comprehensive strategy for reaching your target market and driving sales. Detail the specific marketing channels you plan to use, such as social media, email marketing, SEO, or traditional advertising.

Describe the nature of your advertising campaigns and promotional activities, explaining how they will capture the attention of your target audience and convey the value of your products or services. Outline your sales strategy, including your sales process, team structure, and sales targets.

Discuss how these marketing and sales efforts will work together to attract and retain customers, generate leads, and ultimately contribute to achieving your business’s revenue goals.

This section is critical to convey to investors and stakeholders that you have a well-thought-out approach to market your business effectively and drive sales growth.

Example: Our marketing strategy includes digital advertising, content marketing, social media promotion, and influencer partnerships. We will also attend trade shows and conferences to showcase our products and connect with potential clients. Our sales strategy involves both direct sales and partnerships with retail stores, as well as online sales through our website and e-commerce platforms.

Logistics and Operations Plan

The Logistics and Operations Plan is a critical component that outlines the inner workings of your business. It encompasses the management of your supply chain, detailing how you acquire raw materials and manage vendor relationships.

Inventory control is another crucial aspect, where you explain strategies for inventory management to ensure efficiency and reduce wastage. The section should also describe your production processes, emphasizing scalability and adaptability to meet changing market demands.

Quality control measures are essential to maintain product standards and customer satisfaction. This plan assures investors and stakeholders of your operational competency and readiness to meet business demands.

Highlighting your commitment to operational efficiency and customer satisfaction underlines your business’s capability to maintain smooth, effective operations even as it scales.

Example: EcoTech partners with reliable third-party manufacturers to produce our eco-friendly technology products. Our operations involve maintaining strong relationships with suppliers, ensuring quality control, and managing inventory.

We also prioritize efficient distribution through various channels, including online platforms and retail partners, to deliver products to our customers in a timely manner.

Financial Projections Plan

In the Financial Projections Plan, lay out a clear and realistic financial future for your business. This should include detailed projections for revenue, costs, and profitability over the next three to five years.

Ground these projections in solid assumptions based on your market analysis, industry benchmarks, and realistic growth scenarios. Break down revenue streams and include an analysis of the cost of goods sold, operating expenses, and potential investments.

This section should also discuss your break-even analysis, cash flow projections, and any assumptions about external funding requirements.

By presenting a thorough and data-backed financial forecast, you instill confidence in potential investors and lenders, showcasing your business’s potential for profitability and financial stability.

This forward-looking financial plan is crucial for demonstrating that you have a firm grasp of the financial nuances of your business and are prepared to manage its financial health effectively.

Example: Over the next three years, we expect to see significant growth in revenue, driven by new product launches and market expansion. Our financial projections include:

• Year 1: $1.5 million in revenue, with a net profit of $200,000.
• Year 2: $3 million in revenue, with a net profit of $500,000.
• Year 3: $4.5 million in revenue, with a net profit of $1 million.

These projections are based on realistic market analysis, growth rates, and product pricing.

Income Statement

The income statement , also known as the profit and loss statement, provides a summary of your company’s revenues and expenses over a specified period. It helps you track your business’s financial performance and identify trends, ensuring you stay on track to achieve your financial goals.

Regularly reviewing and analyzing your income statement allows you to monitor the health of your business, evaluate the effectiveness of your strategies, and make data-driven decisions to optimize profitability and growth.

Example: The income statement for EcoTech’s first year of operation is as follows:

• Revenue: $1,500,000
• Cost of Goods Sold: $800,000
• Gross Profit: $700,000
• Operating Expenses: $450,000
• Net Income: $250,000

This statement highlights our company’s profitability and overall financial health during the first year of operation.

Cash Flow Statement

A cash flow statement is a crucial part of a financial business plan that shows the inflows and outflows of cash within your business. It helps you monitor your company’s liquidity, ensuring you have enough cash on hand to cover operating expenses, pay debts, and invest in growth opportunities.

By including a cash flow statement in your business plan, you demonstrate your ability to manage your company’s finances effectively.

Example:  The cash flow statement for EcoTech’s first year of operation is as follows:

Operating Activities:

• Depreciation: $10,000
• Changes in Working Capital: -$50,000
• Net Cash from Operating Activities: $210,000

Investing Activities:

•  Capital Expenditures: -$100,000
• Net Cash from Investing Activities: -$100,000

Financing Activities:

• Proceeds from Loans: $150,000
• Loan Repayments: -$50,000
• Net Cash from Financing Activities: $100,000
• Net Increase in Cash: $210,000

This statement demonstrates EcoTech’s ability to generate positive cash flow from operations, maintain sufficient liquidity, and invest in growth opportunities.

Tips on Writing a Business Plan

1. Be clear and concise: Keep your language simple and straightforward. Avoid jargon and overly technical terms. A clear and concise business plan is easier for investors and stakeholders to understand and demonstrates your ability to communicate effectively.

2. Conduct thorough research: Before writing your business plan, gather as much information as possible about your industry, competitors, and target market. Use reliable sources and industry reports to inform your analysis and make data-driven decisions.

3. Set realistic goals: Your business plan should outline achievable objectives that are specific, measurable, attainable, relevant, and time-bound (SMART). Setting realistic goals demonstrates your understanding of the market and increases the likelihood of success.

4. Focus on your unique selling proposition (USP): Clearly articulate what sets your business apart from the competition. Emphasize your USP throughout your business plan to showcase your company’s value and potential for success.

5. Be flexible and adaptable: A business plan is a living document that should evolve as your business grows and changes. Be prepared to update and revise your plan as you gather new information and learn from your experiences.

6. Use visuals to enhance understanding: Include charts, graphs, and other visuals to help convey complex data and ideas. Visuals can make your business plan more engaging and easier to digest, especially for those who prefer visual learning.

7. Seek feedback from trusted sources: Share your business plan with mentors, industry experts, or colleagues and ask for their feedback. Their insights can help you identify areas for improvement and strengthen your plan before presenting it to potential investors or partners.

FREE Business Plan Template

To help you get started on your business plan, we have created a template that includes all the essential components discussed in the “How to Write a Business Plan” section. This easy-to-use template will guide you through each step of the process, ensuring you don’t miss any critical details.

The template is divided into the following sections:

• Mission statement
• Business Overview
• Key products or services
• Target market
• Financial highlights
• Company goals
• Strategies to achieve goals
• Measurable, time-bound objectives
• Company History
• Mission and vision
• Unique selling proposition
• Demographics
• Psychographics
• Pain points
• Industry trends
• Customer needs
• Competitor strengths and weaknesses
• Opportunities
• Competitor products and services
• Market positioning
• Pricing strategies
• Organizational structure
• Key roles and responsibilities
• Management team backgrounds
• Product or service features
• Competitive advantages
• Marketing channels
• Advertising campaigns
• Promotional activities
• Sales strategies
• Supply chain management
• Inventory control
• Production processes
• Quality control measures
• Projected revenue
• Assumptions
• Cash inflows
• Cash outflows
• Net cash flow

What is a Business Plan?

A business plan is a strategic document that outlines an organization’s goals, objectives, and the steps required to achieve them. It serves as a roadmap as you start a business , guiding the company’s direction and growth while identifying potential obstacles and opportunities.

Typically, a business plan covers areas such as market analysis, financial projections, marketing strategies, and organizational structure. It not only helps in securing funding from investors and lenders but also provides clarity and focus to the management team.

A well-crafted business plan is a very important part of your business startup checklist because it fosters informed decision-making and long-term success.

Why You Should Write a Business Plan

Understanding the importance of a business plan in today’s competitive environment is crucial for entrepreneurs and business owners. Here are five compelling reasons to write a business plan:

• Attract Investors and Secure Funding : A well-written business plan demonstrates your venture’s potential and profitability, making it easier to attract investors and secure the necessary funding for growth and development. It provides a detailed overview of your business model, target market, financial projections, and growth strategies, instilling confidence in potential investors and lenders that your company is a worthy investment.
• Clarify Business Objectives and Strategies : Crafting a business plan forces you to think critically about your goals and the strategies you’ll employ to achieve them, providing a clear roadmap for success. This process helps you refine your vision and prioritize the most critical objectives, ensuring that your efforts are focused on achieving the desired results.
• Identify Potential Risks and Opportunities : Analyzing the market, competition, and industry trends within your business plan helps identify potential risks and uncover untapped opportunities for growth and expansion. This insight enables you to develop proactive strategies to mitigate risks and capitalize on opportunities, positioning your business for long-term success.
• Improve Decision-Making : A business plan serves as a reference point so you can make informed decisions that align with your company’s overall objectives and long-term vision. By consistently referring to your plan and adjusting it as needed, you can ensure that your business remains on track and adapts to changes in the market, industry, or internal operations.
• Foster Team Alignment and Communication : A shared business plan helps ensure that all team members are on the same page, promoting clear communication, collaboration, and a unified approach to achieving the company’s goals. By involving your team in the planning process and regularly reviewing the plan together, you can foster a sense of ownership, commitment, and accountability that drives success.

What are the Different Types of Business Plans?

In today’s fast-paced business world, having a well-structured roadmap is more important than ever. A traditional business plan provides a comprehensive overview of your company’s goals and strategies, helping you make informed decisions and achieve long-term success. There are various types of business plans, each designed to suit different needs and purposes. Let’s explore the main types:

• Startup Business Plan: Tailored for new ventures, a startup business plan outlines the company’s mission, objectives, target market, competition, marketing strategies, and financial projections. It helps entrepreneurs clarify their vision, secure funding from investors, and create a roadmap for their business’s future. Additionally, this plan identifies potential challenges and opportunities, which are crucial for making informed decisions and adapting to changing market conditions.
• Internal Business Plan: This type of plan is intended for internal use, focusing on strategies, milestones, deadlines, and resource allocation. It serves as a management tool for guiding the company’s growth, evaluating its progress, and ensuring that all departments are aligned with the overall vision. The internal business plan also helps identify areas of improvement, fosters collaboration among team members, and provides a reference point for measuring performance.
• Strategic Business Plan: A strategic business plan outlines long-term goals and the steps to achieve them, providing a clear roadmap for the company’s direction. It typically includes a SWOT analysis, market research, and competitive analysis. This plan allows businesses to align their resources with their objectives, anticipate changes in the market, and develop contingency plans. By focusing on the big picture, a strategic business plan fosters long-term success and stability.
• Feasibility Business Plan: This plan is designed to assess the viability of a business idea, examining factors such as market demand, competition, and financial projections. It is often used to decide whether or not to pursue a particular venture. By conducting a thorough feasibility analysis, entrepreneurs can avoid investing time and resources into an unviable business concept. This plan also helps refine the business idea, identify potential obstacles, and determine the necessary resources for success.
• Growth Business Plan: Also known as an expansion plan, a growth business plan focuses on strategies for scaling up an existing business. It includes market analysis, new product or service offerings, and financial projections to support expansion plans. This type of plan is essential for businesses looking to enter new markets, increase their customer base, or launch new products or services. By outlining clear growth strategies, the plan helps ensure that expansion efforts are well-coordinated and sustainable.
• Operational Business Plan: This type of plan outlines the company’s day-to-day operations, detailing the processes, procedures, and organizational structure. It is an essential tool for managing resources, streamlining workflows, and ensuring smooth operations. The operational business plan also helps identify inefficiencies, implement best practices, and establish a strong foundation for future growth. By providing a clear understanding of daily operations, this plan enables businesses to optimize their resources and enhance productivity.
• Lean Business Plan: A lean business plan is a simplified, agile version of a traditional plan, focusing on key elements such as value proposition, customer segments, revenue streams, and cost structure. It is perfect for startups looking for a flexible, adaptable planning approach. The lean business plan allows for rapid iteration and continuous improvement, enabling businesses to pivot and adapt to changing market conditions. This streamlined approach is particularly beneficial for businesses in fast-paced or uncertain industries.
• One-Page Business Plan: As the name suggests, a one-page business plan is a concise summary of your company’s key objectives, strategies, and milestones. It serves as a quick reference guide and is ideal for pitching to potential investors or partners. This plan helps keep teams focused on essential goals and priorities, fosters clear communication, and provides a snapshot of the company’s progress. While not as comprehensive as other plans, a one-page business plan is an effective tool for maintaining clarity and direction.
• Nonprofit Business Plan: Specifically designed for nonprofit organizations, this plan outlines the mission, goals, target audience, fundraising strategies, and budget allocation. It helps secure grants and donations while ensuring the organization stays on track with its objectives. The nonprofit business plan also helps attract volunteers, board members, and community support. By demonstrating the organization’s impact and plans for the future, this plan is essential for maintaining transparency, accountability, and long-term sustainability within the nonprofit sector.
• Franchise Business Plan: For entrepreneurs seeking to open a franchise, this type of plan focuses on the franchisor’s requirements, as well as the franchisee’s goals, strategies, and financial projections. It is crucial for securing a franchise agreement and ensuring the business’s success within the franchise system. This plan outlines the franchisee’s commitment to brand standards, marketing efforts, and operational procedures, while also addressing local market conditions and opportunities. By creating a solid franchise business plan, entrepreneurs can demonstrate their ability to effectively manage and grow their franchise, increasing the likelihood of a successful partnership with the franchisor.

Using Business Plan Software

Creating a comprehensive business plan can be intimidating, but business plan software can streamline the process and help you produce a professional document. These tools offer a number of benefits, including guided step-by-step instructions, financial projections, and industry-specific templates. Here are the top 5 business plan software options available to help you craft a great business plan.

1. LivePlan

LivePlan is a popular choice for its user-friendly interface and comprehensive features. It offers over 500 sample plans, financial forecasting tools, and the ability to track your progress against key performance indicators. With LivePlan, you can create visually appealing, professional business plans that will impress investors and stakeholders.

2. Upmetrics

Upmetrics provides a simple and intuitive platform for creating a well-structured business plan. It features customizable templates, financial forecasting tools, and collaboration capabilities, allowing you to work with team members and advisors. Upmetrics also offers a library of resources to guide you through the business planning process.

Bizplan is designed to simplify the business planning process with a drag-and-drop builder and modular sections. It offers financial forecasting tools, progress tracking, and a visually appealing interface. With Bizplan, you can create a business plan that is both easy to understand and visually engaging.

Enloop is a robust business plan software that automatically generates a tailored plan based on your inputs. It provides industry-specific templates, financial forecasting, and a unique performance score that updates as you make changes to your plan. Enloop also offers a free version, making it accessible for businesses on a budget.

5. Tarkenton GoSmallBiz

Developed by NFL Hall of Famer Fran Tarkenton, GoSmallBiz is tailored for small businesses and startups. It features a guided business plan builder, customizable templates, and financial projection tools. GoSmallBiz also offers additional resources, such as CRM tools and legal document templates, to support your business beyond the planning stage.

Business Plan FAQs

What is a good business plan.

A good business plan is a well-researched, clear, and concise document that outlines a company’s goals, strategies, target market, competitive advantages, and financial projections. It should be adaptable to change and provide a roadmap for achieving success.

What are the 3 main purposes of a business plan?

The three main purposes of a business plan are to guide the company’s strategy, attract investment, and evaluate performance against objectives. Here’s a closer look at each of these:

• It outlines the company’s purpose and core values to ensure that all activities align with its mission and vision.
• It provides an in-depth analysis of the market, including trends, customer needs, and competition, helping the company tailor its products and services to meet market demands.
• It defines the company’s marketing and sales strategies, guiding how the company will attract and retain customers.
• It describes the company’s organizational structure and management team, outlining roles and responsibilities to ensure effective operation and leadership.
• It sets measurable, time-bound objectives, allowing the company to plan its activities effectively and make strategic decisions to achieve these goals.
• It provides a comprehensive overview of the company and its business model, demonstrating its uniqueness and potential for success.
• It presents the company’s financial projections, showing its potential for profitability and return on investment.
• It demonstrates the company’s understanding of the market, including its target customers and competition, convincing investors that the company is capable of gaining a significant market share.
• It showcases the management team’s expertise and experience, instilling confidence in investors that the team is capable of executing the business plan successfully.
• It establishes clear, measurable objectives that serve as performance benchmarks.
• It provides a basis for regular performance reviews, allowing the company to monitor its progress and identify areas for improvement.
• It enables the company to assess the effectiveness of its strategies and make adjustments as needed to achieve its objectives.
• It helps the company identify potential risks and challenges, enabling it to develop contingency plans and manage risks effectively.
• It provides a mechanism for evaluating the company’s financial performance, including revenue, expenses, profitability, and cash flow.

Can I write a business plan by myself?

Yes, you can write a business plan by yourself, but it can be helpful to consult with mentors, colleagues, or industry experts to gather feedback and insights. There are also many creative business plan templates and business plan examples available online, including those above.

We also have examples for specific industries, including a using food truck business plan , salon business plan , farm business plan , daycare business plan , and restaurant business plan .

Is it possible to create a one-page business plan?

Yes, a one-page business plan is a condensed version that highlights the most essential elements, including the company’s mission, target market, unique selling proposition, and financial goals.

How long should a business plan be?

A typical business plan ranges from 20 to 50 pages, but the length may vary depending on the complexity and needs of the business.

What is a business plan outline?

A business plan outline is a structured framework that organizes the content of a business plan into sections, such as the executive summary, company description, market analysis, and financial projections.

What are the 5 most common business plan mistakes?

The five most common business plan mistakes include inadequate research, unrealistic financial projections, lack of focus on the unique selling proposition, poor organization and structure, and failure to update the plan as circumstances change.

What questions should be asked in a business plan?

A business plan should address questions such as: What problem does the business solve? Who is the specific target market ? What is the unique selling proposition? What are the company’s objectives? How will it achieve those objectives?

What’s the difference between a business plan and a strategic plan?

A business plan focuses on the overall vision, goals, and tactics of a company, while a strategic plan outlines the specific strategies, action steps, and performance measures necessary to achieve the company’s objectives.

How is business planning for a nonprofit different?

Nonprofit business planning focuses on the organization’s mission, social impact, and resource management, rather than profit generation. The financial section typically includes funding sources, expenses, and projected budgets for programs and operations.

Image: Envato Elements

Your email address will not be published. Required fields are marked *

© Copyright 2003 - 2024, Small Business Trends LLC. All rights reserved. "Small Business Trends" is a registered trademark.

12 Ways to Gain a Competitive Edge in Your Career