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In Business Planning, Competition is Good

When developing the competition section of your business plan, companies must define competition correctly, select the appropriate competitors to analyze, and explain its competitive advantages.

To start, companies must align their definition of competition with investors. Investors define competition as any service or product that a customer can use to fulfill the same need(s) as the company fulfills. This includes firms that offer similar products, substitute products and other customer options (such as performing the service or building the product themselves). Under this broad definition, any business plan that claims there are no competitors greatly undermines the credibility of the management team.

In identifying competitors, companies often find themselves in a difficult position. On one hand, they want to show that they are unique (even under the investors' broad definition) and list no or few competitors. However, this has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough customer need to support the company's products and/or services.

Business plans must detail direct and, when applicable, indirect competitors. Direct competitors are those that serve the same target market with similar products and services. Indirect competitors are those that serve the same target market with different products and services, or a different target market with similar products and services.

After identifying competitors, the business plan must describe them. In doing so, the plan must also objectively analyze each competitor's strengths and weaknesses and the key drivers of competitive differentiation in the marketplace.

Perhaps most importantly, the competition section must describe the company's competitive advantages over the other firms, and ideally how the company's business model creates barriers to entry. "Barriers to entry" are reasons why customers will not leave once acquired.

In summary, too many business plans want to show how unique their venture is and, as such, list no or few competitors. However, this often has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough customer need to support the venture's products and/or services. In fact, when positioned properly, including successful and/or public companies in a competitive space can be a positive sign since it implies that the market size is big. It also gives investors the assurance that if management executes well, the venture has substantial profit and liquidity potential.

Since its inception, Growthink Business Plans has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share. Growthink has become the firm of choice for venture capital firms, angel investors, corporations and entrepreneurs in the know. For more information please visit http://www.growthink.com

In The News:

NASA flight engineer Kathleen "Kate" Rubins set out on her fourth career spacewalk on Friday, in an effort to ready the International Space Station (ISS) for solar array upgrades.
Astronauts from NASA and the Japan Aerospace Exploration Agency (JAXA) have embarked on the year's fourth spacewalk to service the International Space Station.
NASA is slated to announce what it says is a "series of firsts" in its Mars 2020 Perseverance rover mission.
A flutter of earthquakes shook Oregon's Mount Hood on Monday. 
SpaceX's Falcon 9 rocket successfully launched 60 new Starlink satellites early Thursday morning.
An ancient Egyptian papyrus version of "Mummification for Dummies" has been revealed by a Danish Egyptologist as the oldest how-to guide yet found.
For the first time in history, astronomers have detected what they've deemed a "space hurricane" in Earth's upper atmosphere.
The asteroid Apophis, nicknamed the "God of Chaos," will pass by Earth on Friday.
Residents of the U.K. were surprised over the weekend when a slow-moving meteor blazed across the night sky.
A massive iceberg, larger than New York City, recently broke off from an ice shelf in Antarctica, according to researchers on Friday. 

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