A great business plan has many sections, but my favorite by far is called “Competition”. That one section is enough to tell a potential investor whether you are a great business builder or headed straight for catastrophe.
How can I be so sure? Let me share a secret with you. I’ve read hundreds of business plans and there are clear signs lurking in the Competition section - signs that tell me whether you will launch a great new business or limp into obscurity. Here are 4 signs that your Competition section needs serious help:
Sign #1… The section is missing or starts with the phrase “We don’t have any competition”
Sign #2… The section omits “The Status Quo” as a competitor
Sign #3… The competitors are all well-known, giant companies like Google or Walmart
Sign #4… It’s not clear how the new business is different from the Competition
If your business plan exhibits any of these signs, you have a problem. No reasonable entrepreneur should start a business this way, and no reasonable investor will write a check when these signs of failure are present. In short: until you re-write the Competition section, do not pass go and do not collect $200.
Here’s how to make your competition section grab investors’ attention and prepare you to launch a great new business.
Research the Market
A great business builder is an expert on his industry. He asks himself everyday, “What problem and I really solving and how are people solving this problem now?” Answering this will start to reveal your true competitors. If you need help answering the question, ask Google. Search on the same keywords you would want your customers to use to find you. And dig deep – if you haven’t seen the 10th page of Google search results, keep reading.
Don’t Forget “Nothing”
Remember, even “doing nothing” is an alternative to buying your product… so don’t be afraid to list “doing nothing” or “Status Quo” as one of your competitors. If you can’t show why “doing nothing” costs more and is less effective, then you’ve got problems beyond the Competition section!
Identify All the Players
The guys who started Facebook at Harvard knew they had competition: Almost every other university had something similar already working. They knew that MySpace was sprinting ahead of them. If you think you don’t have any competition, think again. Look for both the large companies and the small. Are there 10 other startups that are tackling the same problem? Search business incubators and venture capital websites for clues. Look for big national companies and small regional ones too.
A great business is built on the idea that you can obliterate the competition. To do that you must know enough about them – and your own business – to show how you are different. And of course you must BE different. If you are building another company to sell Big Macs, (or Mac Books) you aren’t a competitor, you are a clone. To emphasize your differences, try putting your features and benefits in a table format – with the features across the top and the competition down the side. Show which features you deliver that the competition cannot (and vice versa).
Businesses succeed because they do something better than their competitors. So if you create a great Competition section, you’ve actually laid a strong foundation for the rest of the plan. Once you know and understand all the competitors, their strengths and their weaknesses, then you can begin to shape your business plan – and your new company – to be a lasting success.
Dedicated to your (Competitive) Profits,
David Worrell provides strategy and finance help for small and medium-sized businesses… and he loves
the business planning tools available at enloop. Give your business a rock solid strategy by visiting David