Starting your own business is exciting. But there’s no denying that it can also be slightly terrifying. One of the scariest parts? Competition. And, let’s face it — there’s a lot of it.
In an ideal world, you’d be the only person on the block doing exactly what you do. But, that’s just not how reality works. No matter how fantastic you are, that doesn’t change the fact that there are people out there who will promise to do the same thing faster, cheaper, and maybe even better.
Love it or hate it, competition is a necessary part of the business world. And, while it might be enough to make you want to throw up your hands and abandon your idea entirely, there’s a better way. Instead, researching and understanding the competition that’s out there will help you leverage that knowledge to better position your own business and set yourself up for success.
The fancy word for this? A competitive analysis. Yes, I know that phrase alone sounds stiff, formal, and a little overwhelming. But don’t panic yet. Today, we’re breaking down exactly what you need to know to conduct your own competitive analysis. Let’s get to the good stuff!
What exactly is a competitive analysis?
If you’ve ever tried to look into a competitive analysis previously, you might have been bombarded with tons of technical and business jargon. But, as mentioned above, this idea really isn’t anything overly complex.
To put it simply, your competitive analysis identifies what competitors are out there and then takes a look at the strategies they’re currently putting into action. Using this information, you can better structure your own methods (and even your product or service!) to set yourself apart and broadcast what exactly makes you unique.
So, now that you have the lowdown on what exactly this is, how do you go about conducting your own? Here’s your step-by-step guide.
1. Identify Your Competitors
Before you can roll up your sleeves and start digging into your competition, you’re going to know who exactly they are. Your first order of business should be identifying your top competitors.
Chances are, you likely already have a rough idea of who you’re going up against. But it’s important that you start a formal list for your competitive analysis.
Remember, you don’t have to list everybody who does the same thing you do (I recommend sticking with around ten businesses tops, to avoid getting overwhelmed). Instead, you should focus on your key competitors — the ones who most closely align with what you do. These will be people who offer the same types of products or services, target the exact same types of customers, and — if you’re not an online-based business — are located near your same geographic area.
Start a simple spreadsheet to keep track of these different competitors. You’ll need a column for basic information, including the business name, website, and year established. You’ll also want a column for each of the steps below, so that you start an easy reference guide that gives you the details of all of your competitors in one glance.
2. Match Up Your Offering
Now, it’s time to take a magnifying glass to your offering — whether that’s a product or a service. Comb through what your competitors are doing to see if there’s anything additional you could do to further differentiate your business.
For example, perhaps you and your competitors are all wedding photographers. You offer exactly the same service. But you make a promise to have proofs delivered to the bride and groom in two weeks or less. That’s something that makes you different. It’s a positive thing — as small as it may seem — that customers will only get from your business.
Keep in mind that your differentiators don’t need to be earth-shattering — nobody expects your business to solve all of the world’s problems. However, by identifying these individualized qualities early on, you’ll have a much easier time marketing your business and standing out from everybody else.
3. Evaluate Strengths
While it can be tempting to analyze your competitors and only poke holes in everything they’re doing (I get it — as bad as it seems, it makes you feel better to tear them down), that’s only part of the picture. You also need to take a good hard look at what they’re doing well.
Perhaps their website is beautifully designed or maybe they’re putting out awesome content to engage their customers. Maybe they’ve received glowing customer reviews about their product, or their social media strategy is incredibly innovative. Whatever it is that this company is knocking out of the park, take note.
Yes, this can be a little disheartening. But think of it as motivation — you’re gathering all sorts of intel that will only help you make your own business that much better.
4. Determine Weaknesses
Call me a little malicious, but this is the fun part –when you get to analyze your competitor’s performance and identify all of the things they could be doing better.
Whether they seem to be targeting way too many different types of customers (making them look unfocused, rather than appealing), they have a few broken links on their website, or they have a moldy blog that hasn’t been updated in literal years, this is your chance to list out all of those areas where things could be improved.
While this might make you feel like that mean girl in the high school cafeteria, I promise it’s an important part of the process. You’ve already looked at what this competitor is doing well so that you can learn from their successes. But, by determining things that could use some polishing, you’re identifying a void that you can fill with your own business. So you’ll still be doing the same thing as this competitor — only way better.
Pulling It All Together
You’ve dug into all of those nitty gritty details. Now what? What do you do with all of this information you worked so hard to find?
Well, this is really up to you. In most cases, your competitive analysis will be part of your overall business plan or marketing plan and can range from one page to 20 and beyond. There are no hard and fast rules, so find what works best for you and go from there.
Just remember to include enough information, so that it’s obvious you put the work and research in — that’s especially important if you’ll be pursuing funding for your business.
Conducting a competitive analysis might seem like an overly formal and ultimately unnecessary part of getting your business started. But it’s an incredibly important step if you want to set yourself up for success.
Follow these four steps, and something that once felt completely overwhelming is sure to be a breeze. Now, instead of panicking about your competition, you can begin leveraging it.