|
Click Here
for more articles
|
|
|
In
Business Planning, Competition is Good
|
|
by:
Dave Lavinsky
|
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.
About the author:
GT Business
Plans has developed over 200 business plans for clients that
have collectively raised over $750 million in financing, launched
numerous new product and service lines and gained competitive advantage
and market share. GT Business Plans is the sister site of GT Venture Capital
Circulated by Article Emporium
|
Perhaps this
Google Search function may be able to
offer some additional ideas
|
