Every business plan has a competitor section, and a lot of them say the same thing: there is no real competition, because this business is different. To the person reading it, that sentence means one of two things. Either there is no demand for what you are selling, or you have not looked.
Neither helps your application. A good competitor analysis does the opposite. It shows you understand the market you are entering, and it gives your forecast prices and volumes that come from somewhere real.
Who you are actually competing with
Start by widening the definition. Your competitors are not just businesses that look like yours. They are everything your customer might spend the same money or time on instead.
- Direct competitors sell the same thing to the same customers. Another cafe on the same street.
- Indirect competitors meet the same need differently. The supermarket meal deal, the office coffee machine, the bakery chain at the station.
- The do-nothing option. For many businesses the biggest competitor is the customer deciding not to buy at all, or to do it themselves. A bookkeeping service competes with the owner’s spreadsheet; a cleaning company competes with the owner’s weekend.
An assessor who knows your sector will think of the indirect competitors even if you do not. It is much better that they find them already in your plan, with an explanation of why customers will still choose you.
Where to find them
For a local business, walk the area at the times your customers would be there, and search online the way a customer would, using a phone and your postcode. Note who appears on maps, delivery platforms and review sites, not just who has a shop front.
For a business that sells more widely, search for the problem you solve rather than the product name, look at who advertises against those searches, and check trade directories and industry associations. Companies House will tell you when a competitor was formed and, for many, give you their filed accounts. Even abbreviated accounts show whether the balance sheet is growing.
Aim for a shortlist: five to ten that matter, not fifty you found.
What to compare
For each one on the shortlist, collect the same few facts, so they can sit in a table:
| What to record | Why it matters |
|---|---|
| Prices for comparable products or services | Anchors your own pricing and your revenue per customer |
| What is included | Explains price differences that are not really differences |
| Who their customers are | Shows where the gaps are |
| Location, opening hours, delivery area | Defines the overlap with your business |
| Reviews: rating, volume, recurring complaints | The complaints are your opportunity |
| How long they have traded, and how big they are | Shows what a sustainable business in this market looks like |
Read the one-star and two-star reviews properly. Recurring complaints about waiting times, missed appointments, poor communication or inflexible terms tell you exactly what customers want and are not getting. If your business fixes one of those, that is your competitive advantage, written in the customer’s own words.
Turning it into something your forecast can use
This is the step most competitor sections skip, and it is the one that makes the analysis worth doing.
Your price. Once you have competitors’ prices in a table, your own price needs a reason. If you are cheaper, the plan has to show you can still make a margin at that price. If you are dearer, it has to show what the customer gets for the difference. Either way, the price in your forecast now has evidence behind it.
Your volume. Established competitors show what the market will actually support. If the successful cafe on the next street seems to do around 150 covers on a Saturday, a new cafe forecasting 300 needs a very good explanation. If a competitor has a waiting list, that is evidence of unmet demand you can cite.
Your share. Rather than claiming a percentage of a national market, estimate how many customers in your catchment could realistically switch to you, and how quickly. That is a figure a lender can test, and it connects the competitor section directly to the sales line in your forecast.
There is more on building the evidence behind those assumptions in why market research matters for your business plan.
Writing it up
Keep the section short and specific:
- A paragraph describing the competitive landscape: who is there, and how the market is split between direct and indirect competitors.
- The comparison table, with your business as the final row.
- Two or three paragraphs on where you fit: which customers you will take, from whom, and why they will switch.
- An honest paragraph on the risk. What happens if the biggest competitor cuts its prices or opens nearby? What would you do?
That last paragraph is often left out, and it is the one that most impresses an experienced reader, because it shows you have thought about the market as it is rather than as you would like it to be. A SWOT analysis is one way to lay this out; there is more on whether you need one in does a business plan need a SWOT analysis.
Keep it current
Competitors open, close and change their prices. Revisit the analysis before every funding application and at least once a year, because the market you researched when you started is not the market you are trading in now.
SquarePlan walks you through your market and competition as part of building the plan, and connects your pricing straight to the financial projections, so a change to your price shows up immediately in margin, break-even and cash. If you would rather have someone do the research and write it up, we write business plans from £499.