April 28, 2023
Adam Hoeksema
A competitor analysis for your business plan can be an incredibly important part of the business planning process. By trying to learn as much as you can about your competitors, you can learn a lot about what to expect in your own business. You can also identify how you can differentiate your business and gain a competitive advantage.
In this article I plan to walk through the following:
With that as our road map, let’s dive in.
What is Included in a Business Plan Competitor Analysis
A competitor analysis should include the following components:
- Market Overview
- Key Competitors
- Competitor Profiles
- Competitive Positioning
- Target Market
- Opportunities and Threats
- Conclusions and Strategic Recommendations
Market Overview
Begin with a brief overview of the market or industry you operate in, outlining its size, growth trends, and key segments. This will provide context for the competitive analysis and help you understand the market dynamics. You can often find some great industry trend data from sources like IBISworld.
Key Competitors
Make a list of your main competitors, which may include direct and indirect competitors. Direct competitors offer similar products or services, while indirect competitors offer alternatives or substitutes that could fulfill the same customer needs.
One major turn off for investors and lenders is to say that you have “no competitors.” You always have competitors. If you are opening a coffee shop in your town that doesn’t have a coffee shop, your competitor might be the coffee at the local gas station, or coffee made at home.
Competitor Profiles
For each key competitor, provide a detailed profile that includes:
- Company background: Briefly describe their history, mission, and size.
- Market share: Estimate their share of the market compared to yours (if you haven’t started yet you won’t have any market share yet) and other competitors.
- Product or service offerings: Describe their products or services and how they compare to yours.
- Pricing strategy: Analyze their pricing model and compare it to your own.
- Distribution channels: Identify the channels they use to distribute their products or services, such as online, retail stores, or partnerships.
- Marketing and promotional strategies: Analyze their marketing efforts, including advertising, social media, and public relations.
- Strengths and weaknesses: Identify their competitive advantages and disadvantages in comparison to your business.
Competitive Positioning
Assess your company's competitive positioning by comparing your strengths, weaknesses, opportunities, and threats (SWOT analysis) to those of your competitors. Highlight what makes you unique and areas where you can gain a competitive advantage.
Target Market
Describe your target market and how it differs from your competitors'. Understanding the market segments that your competitors serve will help you better define your own target audience and tailor your marketing strategies accordingly.
Opportunities and Threats
Based on your competitor analysis, identify potential opportunities to exploit in the market and threats that your competitors may pose to your business. This can help you develop proactive strategies to mitigate risks and capitalize on growth opportunities.
Conclusion and Strategic Recommendations
Summarize your findings and provide recommendations for how your business can differentiate itself, address competitive challenges, and gain market share. This may include recommendations for product or service development, pricing, marketing strategies, or strategic partnerships.
How to Find Data on Competitors
So one of your initial questions should be where in the world do you find reliable data on your competitors, it's not like you can call them and just ask them for their financial statements and customer database!
Depending on whether your business is primarily online or a physical location, the approach and tools that I use to do competitive research will differ. I am going to show you examples of the type of research that I like to do and the data that I am able to pull from a couple of tools that we like to utilize.
Finding Competitor Data for Online Businesses
There are a few data points that I like to find for online competitors. I want to know:
- How much organic traffic is my competitor's website getting?
- How much paid traffic is my competitor’s website getting?
- How much search volume is there for keywords that I want to compete for?
- How much would I have to pay per click for keywords that I want to rank for?
In order to find this data I use two tools.
Let me show you how I use both tools to gather data on my competitors.
How to Use Ahrefs for Competitor Analysis
Let’s assume I am working on a business plan for a gym in Indianapolis. I would start by looking at the search volume for “Indianapolis Gyms” which would give me some idea of the number of people searching for this each month. You can see below that there are 250 monthly searches for this keyword according to Ahrefs.
Next, I would look to see which gym is top ranked for that keyword and in this example I found a Lifetime Fitness. Now I can take that keyword and run it through the Ahrefs Site Explorer and I can now see how much website traffic that particular competitor is getting each month. This particular website is getting about 800 organic website visitors per month.
Ahrefs can also estimate how much paid traffic a particular website is receiving each month as well.
If you want to see exactly how I use the Ahrefs tool, check out the short video below:
Watch: I recorded a demo of using Ahrefs for competitor analysis here.
How to Use Google Adwords Keyword Planner for Market Research
I also like to use Google Adwords Keyword Planner to gather some additional data about my market. So again, if I search for “Indianapolis Gyms” I can see Google’s estimate of traffic per month as well as seasonal trends in search volume. I can also see the average cost per click that advertisers are paying for that keyword.
As you can see, the cost per click ranges from $1.32 to $5.29 for advertisers right now. If you can see how much paid traffic your competitor is getting on Ahrefs and you know the average cost per click for relevant keywords from Google Keyword Planner, you can back into a rough estimate of how much your competitor is spending on advertising per month. I think this can be useful as well.
One other thing you might notice is that Ahrefs seems to have conservative search volume estimates compared to Google Keyword Planner. We saw 250 monthly searches from Ahrefs and 2,400 from Google Keyword Planner. This should give you some range of how big your market might be.
Finding Competitor Data for Physical Retail Businesses
If your competition is not an online business, or doesn’t really have much of an online presence, then finding foot traffic data is going to be much more useful for you in your competitor analysis.
We have partnered with a company called Advan Research to be able to pull foot traffic data reports from their platform.
Here is some of the really cool data that we can get and how you might use it in your competitor research.
Monthly Foot Traffic Data
You can pull monthly foot traffic data for your competitors. This foot traffic data is based on cell phone GPS data and can provide some great insight on potential customer traffic you might expect. For example, in the graph below we pulled the monthly traffic for a local Steakhouse that gets about 5,000 visitors per month.
Daily and Hourly Foot Traffic Data
You can pull foot traffic data for a location by the day and the hour to get an idea of what days and hours are busiest for your competitors and likely to be busiest for you.
Customer Location Data
One of the most powerful data reports you can pull on a competitor is a heat map of where their customers are coming from. If you notice that customers are traveling a long distance to your competitor, you could look at finding a location that is closer to a large segment of your competitors' customers.
Annual Revenue Estimate and Revenue per Square Foot Data
Finally, for larger businesses or publicly traded companies, Advan can provide you with estimates of their annual revenue, revenue per square foot and how many square feet they are renting for their business. Talk about some serious competitor intelligence that can set you ahead and impress your investors and lenders.
Competitor Analysis Business Plan Example
The following is an example of a competitor analysis for a restaurant business plan which you can adapt to your own business. I would also recommend that you incorporate data from Ahrefs, Google Adwords Keyword Planner and our Foot Traffic Data Report into this section of your business plan. The idea here is to get a good understanding of where the competitors stand and to identify your place in the market.
I. Competitor Analysis
The purpose of this section is to identify and evaluate the main competitors in the local Italian restaurant industry and to determine our competitive positioning. Understanding the competitive landscape will help us to develop effective strategies that enable us to compete effectively in the market, differentiate ourselves, and carve out a sustainable market share. Our analysis will focus on the following key areas
A. Market Overview
The local Italian restaurant market is valued at approximately $X million and is expected to grow at a CAGR of X% over the next five years. The industry is characterized by the presence of several well-established Italian restaurants, popular chain restaurants, and a few emerging independent restaurants. The primary segments within the industry are fine dining, casual dining, and fast-casual dining.
B. Key Competitors
Competitor A (Fine Dining Italian Restaurant)
Market Share: X%
Strengths: High-quality ingredients, exceptional culinary skills, elegant ambiance, and strong brand recognition.
Weaknesses: High pricing, limited menu offerings, and a focus on a specific customer segment (high-income individuals).
Competitor B (Casual Dining Italian Restaurant)
Market Share: X%
Strengths: Wide variety of Italian dishes, family-friendly atmosphere, and strong customer loyalty.
Weaknesses: Inconsistent food quality, slow service during peak hours, and limited menu innovation.
Competitor C (Fast-Casual Italian Restaurant)
Market Share: X%
Strengths: Quick service, affordable pricing, and convenient locations.
Weaknesses: Limited menu variety, lack of authentic Italian flavors, and a focus on takeout and delivery over dine-in experiences.
C. Competitive Positioning
Based on our analysis, our competitive positioning is as follows:
Unique Value Proposition: Our primary differentiation lies in our commitment to providing authentic Italian cuisine using high-quality, locally-sourced ingredients, combined with exceptional customer service in a warm and inviting atmosphere. This will enable us to attract customers seeking a genuine Italian dining experience that sets us apart from competitors.
Competitive Pricing: Our pricing strategy is to offer value for money while maintaining profitability. By carefully selecting our suppliers and managing our costs, we will be able to offer a competitively priced menu without compromising on quality.
Target Market: We will cater to a broad range of customers, including families, couples, and groups of friends, by offering a versatile menu that appeals to various tastes and preferences. Our focus will be on attracting local patrons and tourists alike, who are looking for an authentic and memorable Italian dining experience.
Marketing and Promotion: We will invest in both traditional and digital marketing strategies to create brand awareness and drive customer traffic. This will include targeted social media campaigns, local newspaper advertisements, participation in local food festivals, and collaboration with local businesses and organizations.
Conclusion
I hope this has been helpful in giving you some ideas on how to gather relevant competitor research so that you can make informed decisions about where you locate and start your business.
If you are interested in our Foot Traffic Data Report to help provide the data for your competitor analysis or other sections of your business plan, please don’t hesitate to contact us.
