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What is competitive advantage? Strategy with examples

how to write competitive advantage in business plan

Creating a competitive advantage is a long process, starting from the very beginning of forming the company’s culture, mission, and vision. You can likely see the advantages you can create while you are creating the company’s mission, aka the summary of why your company/product exists, which customer problem you aim to solve, and your overall goal.

What Is Competitive Advantage Strategy With Examples

At the end of the day everything is defined for creating customer value, which generates profit for the business 🤑

The role of a competitive advantage is then to make sure that you are creating and delivering the customer value as you planned.

In this article, we will learn the story of competitive advantage. We will understand the process to analyze our product and market, how we can state our strategy inside the market, and how we can test our options. By the end, we will learn how to sustain a competitive advantage with best practices and real-life examples.

What do we mean by competitive advantage?

Competitive advantage is the capability you have over competitors to create value for customers. The advantage creation process starts from the mission, which usually coincides with the inception of the company in the first place:

Advantage Creation Process

The strategy of your company may be different, but each decision you make and feature you define aims to achieve a competitive advantage. If I still can’t emphasize how important competitive advantage is, think about it like this: every goal we want to achieve in our daily lives as product manager serves to create a competitive advantage.

You can say you achieved a competitive advantage if:

  • You are offering something different than your competitors
  • Your company’s strategy is different than other companies
  • You can create more economic value with your product than your competitors

As product managers, our role requires us to carry the company’s mission and objectives into our product. To do this, we have to analyze the market, external competitors, our product, and internal company capabilities. According to our analysis, we create options and select our strategy.

The type of choices we make shapes our goals and how we want to compete with our rivals. The decision we make puts our product into one of two categories and helps shape our competitive advantage:

  • Niche product
  • Cost advantage product

1. Niche product

When you have a niche product, users prefer your product because it creates a unique output — something they can’t get elsewhere. Users will often pay extra for this.

I love to provide Apple examples in these cases. Apple products offer you premium features and users don’t mind paying the required amount. Think of new iPhones or Mac laptops — the experience they provide isn’t easily replicated by competitors. With a niche product, however, don’t forget there is always a risk of being copied. The challenge for this method is protecting your uniqueness.

To continue with modern examples, think of how Instagram creates a unique platform for sharing photos, the same way that Twitter does with small posts and that Facebook does for longer posts and videos.

When we think of a niche product, I can’t skip the classic example of Coca-Cola. With its unique recipe, no one has been able to replicate or get close to it.

2. Cost advantage product

While making the product, your company should have a production or distribution advantage over rivals. With a cost advantage, you can sell your products at competitive prices.

We can think of big brands for this — because of their high production amounts, they catch a cost advantage opportunity. Walmart can be one of the best examples of this strategy. They offer very low prices and for that reason, people choose to shop there over other stores.

how to write competitive advantage in business plan

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how to write competitive advantage in business plan

How to identify and analyze your product’s competitive advantage

Competitive advantage can only be created after a strategic management process. As product managers, we identify the differentiator points and amplify them to create a competitive advantage:

Different Types Of Competitive Advantage

The decision we will make will be between the type of advantage we seek and the target market. I recommend you start with your target market.

If you still haven’t read Start with Why: How Great Leaders Inspire Everyone to Take Action by Simon Sinek, I recommend that you start asking why 🧐 For example, why will users pay for your product and why you are producing this product in the first place?

The second big decision is what kind of an advantage you seek. This is the time to bring your analysis and every input you have to the table. Lower cost or differentiation has its levels like in the picture above. You don’t have to focus on a pure version of these, though, you can mix the customer need and market situation and create an in-between.

As we discussed earlier, to be able to create a competitive advantage, you should select one of the strategies from your analysis. How can you decide which strategy is the best? Your winner which will become your advantage should pass at least three tests:

  • The fit test
  • The competitive advantage test
  • The performance test

1. The fit test

For the first test, we go over the company’s vision, mission, objectives, and company structure. We may know the problem, but our approach to solving it should fit our company culture and internal dynamics. We search for the best fit according to our internal and external analysis.

2. The competitive advantage test

You may find a good competitive advantage, but it is not enough if you can’t sustain it . We mentioned finding an advantage, but now we will test if it is likely to sustain our strategy (like Coca-Cola).

The competitive advantage can be easy to imitate and we may only have a first-mover advantage . This option has a risk if you are investing more and competitors will be able to access the technology behind your product easily. They may even beat you with lower-cost strategies. For these reasons, you should have a good plan to sustain the advantage you created.

3. The performance test

Performance is the profit you will generate with this advantage. At the end of the day, we are seeking profit and the higher value advantage will most likely be our winner. You need to create a value proposition model for each option.

Additionally, you should check the product’s performance, strengths, and the market around it. Use product metrics to see how it’s doing. The performance of the product can be determined with all of those components.

What does it mean to have a sustainable competitive advantage?

In the competitive advantage test, we are checking if the strategy is sustainable or not. Do not worry if you think your advantage will be imitated by your rivals. Most competitive advantages are brilliant ideas and most of them will be copied in a way. Your rivals will find a way to offer a better solution by using your idea.

Sustainable competitive advantage means you earn high profits with this strategy and the money keeps coming in the long term. However, as you can imagine, the more profit you get, the more competition you will create. And that’s not all, this competition will decrease your sustainability in most cases.

If you succeed in creating an advantage that’s hard to imitate and competitors are unable to find your source, you can say that you have a sustainable advantage. In some product markets, competitors may not imitate your product directly — they may offer a better solution and attract your customers. This example can be seen mostly in the service industry.

Coca-Cola has a sustained product strategy as they kept their formula impossible to imitate. They’ve updated their recipe but still have never had a competitor that copied their recipe or flavor exactly. There are other components supporting this success, such as marketing and sales teams.

When you create a good strategy and opportunity, sustaining the success can be done through all sources of the company. However, do not forget that even sustainable competitive advantages may expire in time.

How to strengthen your product’s competitive advantage over time

As a product manager, finding our own (as well as our competitors’) product strengths and weaknesses is our main duty. However, creating a competitive advantage requires a good strategy. You need a strategy to succeed.

What makes a good product manager is the agile modifications in your strategy over time. If you are persistent to continue in the same strategy, know that your advantage is going to go away.

The below list is variables that you need to be aware of to avoid being beaten by your rivals:

  • Following the needs shift in the market conditions
  • Using the latest technology
  • Following the trends and market opportunities
  • Knowing every move your competitors take
  • Knowing customer needs and changing tastes
  • Creating continuous ideas for the product and the strategy improvement

Time is crucial for even the best things. When the time comes, you should be able to point out the elements or strategies that should be abandoned. A product’s strategy includes everything from abandoned features, new planned initiatives, ongoing strategy, and new elements to adapt to changing circumstances.

The company’s strategy acts as a roadmap to our competitive advantage, along with the long-term plan to beat competitors in the market. And to be able to call yourself a good product manager, you should have a good strategy and good execution capability.

As the product manager, you should be able to address the solutions to possible obstacles the company may face. You should have the answers below for long-term success:

  • How can we beat our new rivals?
  • How can we sustain product growth if our user count decreases?
  • How can we adapt if our customer base changes?
  • Should we reduce costs and compete using discounting?
  • Should we partner with a rival that has a capability we don’t have?
  • Should we expand our business into different countries/demographics?
  • Should we find new product lines or substitute products?

This continuous questioning process will help you to maintain and strengthen your product’s competitive advantage.

Best practices for leveraging competitive advantage in product development

There are a few practices and tools to help you land your competitive advantage through research and market analysis, including value chain analysis, SWOT analysis, and weighted competitive strength assessment.

Value chain analysis

Product value chain analysis is an effective method to convert your company’s activities into a competitive advantage. This method helps companies understand their own processes better and, with the help of that knowledge, create an awareness of the company’s strengths.

Analysis starts with dividing a company’s process into primary and secondary activities. Primary activities show us what to focus more on the processes that create higher costs and analyze more to decrease them. Primary activities are most likely competitive advantages that we have over our rivals. Secondary activities show us the unnecessary processes so that we can eliminate them to create a cost advantage.

SWOT analysis

Strength, weaknesses, opportunities, and threats are the key elements of this analysis. You can use SWOT analysis to find your company’s competitive advantage options:

  • Strengths — Internal strengths are the basis for our strategies
  • Weaknesses — Internal weaknesses are our deficient capabilities
  • Opportunities — Market opportunities are our objectives that will become the strategy
  • Threats — External threats help us create defensive points in our strategies

SWOT Analysis

SWOT helps you to find a new strategy or recommend a new strategic action. You will have the opportunity to use your strengths while you are seizing opportunities and preventing external threats. The created strategic actions will strengthen your competitive advantage or create a shiny new one.

Weighted competitive strength assessment

Weighted competitive strength assessment is different from the other methods and helps decide which strategy to use, rather than helping find options. Each possible competitive advantage gets scored and the one with the most points dictates which creates the most value and helps us beat rivals.

To do this, follow the steps below:

  • Prepare a SWOT analysis or make a list of the competitive strengths and weaknesses
  • Prepare the market’s key success factors and assign importance and weight to each strength
  • Add your competitors to the list and add scores on each competitive strength for all of them
  • Multiply the scores with importance weight and sum the weighted strength for each competitor. The overall measure will be the competitive strength of each competitor
  • Analyze the result ratings and create a concussion document
  • List the competitive advantages and disadvantages of the company
  • Create a strengths and weaknesses list for future strategy processes

The company with a higher weighted score will have an overall advantage within the market. The scores will help you to decide what strategy will be better for you and which will not.

Examples of products with strong competitive advantages and how they achieved them

We earlier talked about Coca-Cola and its competitive advantage. The formula of their drink is not their only competitive strength, however. They also have big, successful marketing strategies that help them to achieve being a market leader.

The Coca-Cola happiness machine and Christmas balloons can be some examples. These kinds of marketing campaigns are called guerilla marketing. The purpose is to increase market share with hit-and-run techniques. It may be a big risk for such a big company but reaps a big reward for its strategy. Coca-Cola takes these kinds of risks and collects the rewards.

Another example is WeChat in China, which created a blue ocean strategy with a next-generation product. Their mobile payment application was using QR codes on smartphones. This strategy is called first-to-market or leapfrogging. They found an opportunity and turned it into a competitive advantage. First movers always have the biggest share in the market so they have a strong competitive advantage.

Another strategy to keep your competitive advantage is an investment in R&D. Technology companies are in a red ocean, and to be able to keep their market share, they should be constantly on alert. Apple’s strongest advantage is its continuous product innovation. They are beating their less-innovative rivals with this advantage and increasing their sales and market share.

Google invested $6.8 billion in 2012 to keep its market share and acquisitions. When other companies gain an advantage, they acquire a competitor company into their organization. They have been acquiring new companies since 2010, such as YouTube, DoubleClick, and Waze. There are hundreds of companies they have done this with and the number continues to increase.

Timing is important for strategic moves and competitive strategies. Sometimes, when to make a move can be more challenging than creating new competitive advantages.

I know I said that being a first-mover has a great effect on creating a strong competitive advantage, but there is no guarantee of success in any market. There are always risks when implementing something new.

Let’s do our best to check the data, and know the product and market. Additionally, we should be careful to only implement strategies that are compatible with our company culture. No need to force our team members to do something different than they believe in. After you implement everything I recommended, I can only send my best wishes to you while waiting for your product to become successful 🫶

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How to Successfully Achieve and Sustain Competitive Advantage

Updated on: 5 January 2023

Competitive advantage is at the core of an organization’s performance in markets where there is heavy competition. It sets an organization apart from its competitors and paves the way for higher profit margins, greater return on assets, and accumulating valuable resources.  

There are many ways to achieve a competitive advantage but only two basic types of it. In this post, we will be looking at the concept of competitive advantage and the steps an organization can follow to achieve and sustain competitive advantage through cost advantage and differentiation. 

What is Competitive Advantage

Competitive advantage stems from the value an organization is able to create for its customers. It can come in the form of prices lower than what is offered by competitors for the same benefits or in the form of unique benefits that counterbalance a higher price. In the end, the value created for the customer should exceed the organization’s cost of creating it in the first place. 

This creates a sustainable advantage allowing them to succeed in the market. 

According to Michael Porter, there are two types of competitive advantage; 

  • Low cost – where an organization is able to produce its products at a lower cost than its competitors.
  • Differentiation – where an organization is able to differentiate its products or service in terms of quality, style, customer service, etc. hence creating superior value to the customers over the competition. 

Cost advantage and differentiation stems from industry structure or how well it can cope with the industry forces that influence its profitability (as introduced in Michael Porter’s five forces model ) better than its competition. 

How to Create and Sustain Competitive Advantage 

Creating a sustainable competitive advantage is a laborious process that needs to be continuously attended to. Adhere to the following steps to ensure you get and remain ahead of the field.   

Analyze Competitors 

To successfully compete in an industry, an organization needs to understand its competitive landscape. This means gathering and analyzing information on competitor strengths, weaknesses, strategies, positioning, value proposition, customer perception, and more.  

Equipped with this knowledge, the right strategy can then be developed to achieve a sustainable competitive advantage.  

Competitor Profile Template What is Competitive Advantage

Learn more about conducting a competitive analysis . 

Map Competitors into Strategic Groups 

A business mainly competes against other businesses that offer similar products or services and follow the same generic competitive strategy. Such businesses that follow the same competitive strategy in an industry belong to the same strategic group. Identifying the other businesses that fall into the same strategic group as it does, is important to an organization in terms of developing a strategy to achieve competitive advantage. 

Strategic Group Map Example

Learn more about mapping strategic groups .  

Assess the Most Attractive Position in the Industry 

Based on your strategic group analysis, you now know who your direct rivals are and where they stand. Next, you should articulate your position in the industry to succeed in the marketplace. Defining your competitive positioning will help identify areas of opportunity for your business. 

Michael Porter’s five forces analysis helps assess and evaluate the competitive strength and position of an organization. Porter’s five forces model helps organizations understand the intensity of competition in an industry, its attractiveness, and profitability level. It helps identify where power lies in a business situation and hence assess the strength of an organization’s current competitive position and the strength of a position that an organization may look to move into.

The five forces include, 

Porter's Five Forces what is competitive advantage

  • The entry of new competitors
  • The threat of new substitutes 
  • The bargaining power of buyers 
  • The bargaining power of suppliers 
  • The rivalry among the existing competitors 

Three Generic Strategies for Achieving Competitive Advantage by Michael Porter 

An organization’s relative position in an industry decides whether its profitability is above or below the industry average. Even within an industry structure that is unfavorable, a well-positioned organization may earn high rates of return. 

Michael Porter introduces three generic strategies for achieving above-average performance in an industry and thus creating a competitive advantage. Generic strategies include cost leadership, differentiation, and focus which is divided into cost focus and differentiation focus.   

The idea behind the concept of generic strategies is that competitive advantage is at the core of any strategy. And in order to achieve a competitive advantage, the organization must make a choice about the type of competitive advantage it wants to attain and the scope within which it will attain it. 

Each of the generic strategies highlights different methods competitive advantage can be achieved.  

Porter's Generic Strategies Example what is competitive advantage

Cost leadership  

An organization adhering to this strategy aims to become the low-cost producer in its industry. The sources of cost advantage vary here from industry to industry, and may include proprietary technology, preferential access to raw material, increased individual skills, improved organizational routines, location advantages, managerial effectiveness, and more .  

A low-cost producer must find and exploit all these sources of cost advantage. An organization that can achieve and sustain overall cost leadership, can become an above-average performer in its industry given that it can command prices at or near the industry average. 

By offering their products or services for a similar or lower price than their competitors, organizations following this strategy can maintain a low-cost position in their industry which will, in turn, increase their return. 

A cost leader however needs to consider the bases of differentiation, for if the product is not perceived as comparable or acceptable by its buyers, it will be forced to reduce prices well below its competitors to gain sales. This will in turn reverse the benefits of its favorable cost position. 

Differentiation

An organization that follows this strategy aims to become unique in its industry along certain dimensions that are highly valued by buyers. In this strategy, the organization selects specific attributes that are considered important by its buyers and uniquely positions itself to meet those needs. It is then rewarded for its uniqueness with premium prices. 

An organization can achieve differentiation through the product itself (quality, price, durability), its delivery system, marketing approach, customer service, and many other factors. The logic behind the differentiation strategy requires that the attributes an organization chooses to differentiate itself should be different from the attributes used by its rivals. 

An organization that can achieve and sustain differentiation can be an above-average performer in its industry if the premium price they offer can offset the extra costs spent for being unique. An organization aiming to become a differentiator therefore should adhere to ways of differentiating that lead to a price premium greater than the cost of differentiating. 

A differentiator shouldn’t ignore its cost position for there’s a chance of its premium prices being nullified by the inferior cost position of competitors. To overcome this, a differentiator can reduce costs in all areas that don’t affect differentiation. 

Focus 

An organization following this strategy selects a segment of the industry and tailors its strategy to cater specifically to them while excluding the rest of the market. By optimizing its strategy for a selected group of customers, the focuser aims to achieve a competitive advantage in its target segment although it cannot achieve an overall competitive advantage. 

The focus strategy has two variants; 

Cost focus: here, the organization seeks a cost advantage in its target segment by exploiting its cost behavior  

Differentiation Focus: here, the organization seeks differentiation in its target segment by exploiting the special needs of the buyers

How to Measure and Analyze Competitive Advantage 

The value chain model by Michale Porter can be used as a tool to diagnose competitive advantage and find ways to improve it. The value chain divides an organization into the distinct activities it performs in designing, producing, marketing, and distributing its products and helps identify the linkages among the activities that are central to achieving competitive advantage. 

Porter’s value chain model divides these activities into two categories,

Value Chain Analysis

  • Primary activities are the activities involved in the physical creation of the product, its sale and transfer to the buyers, and after-sale assistance. 
  • Support activities ; these are the activities that support the primary activities and each other by providing purchased inputs, technology, human resources, and various organization-wide functions.  

The value chain analysis helps understand the activities that are most valuable and should be optimized to achieve competitive advantage.The firm can then optimize the primary activities that account for the greatest share of production costs and increase profit margins. The analysis can also reveal the support activities that could use more spending to generate better value.

Analyzing competitive advantage 

Here’s how to analyze your organization’s value chain based on how you want to develop a competitive advantage (cost leadership or differentiation). 

Cost leadership 

In order to reduce the cost of internal business activities, 

  • First, identify the primary and support activities involved in developing and delivering products and services. 
  • Determine the importance of each activity in terms of production cost. Those activities that consume a large percentage of the total cost of production should be addressed first. 
  • Identify the cost drivers behind each activity by analyzing how they use the company resources. 
  • Map out the connections between the activities to better understand the roles each plays in the overall value chain. This will allow you to detect problems such as how reducing the cost of one activity would cause the cost of a linked activity to increase. 
  • Now that you have understood the cost drivers and the inefficient processes in the value chain, you can make informed decisions on how to improve them and reduce production cost.

Differentiation   

An organization following a differentiation strategy can effectively create more value for the buyer by adding product features and improving customer satisfaction by following the steps below.

  • Identify the activities in the value chain that contribute the most to creating customer value.  
  • Evaluate the differentiation strategies for improving customer value. Strategies like adding more product features , improving customer service and responsiveness, and offering complementary products can be used to increase product differentiation and product value.
  • Identify the best sustainable differentiation. Creating superior differentiation and customer value requires the use of many interrelated activities and strategies. Use the best combination of them to pursue a sustainable differentiation advantage.  

Now It’s Your Turn to Develop a Competitive Advantage Strategy 

To gain a competitive advantage is to attract more customers, make more profit, return more value to shareholders than rival organizations do. A company can effectively gain a competitive advantage in one of two ways; by reducing its own costs and by adding more value to its products or services hence differentiating itself from competitors. 

We hope this post will assist you in developing your own strategy to achieve a sustainable competitive advantage. Got anything to add? Let us know in the comments below. 

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How to Write the Competitor Analysis Section of the Business Plan

Writing The Business Plan: Section 4

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

how to write competitive advantage in business plan

The competitor analysis section can be the most difficult section to compile when writing a business plan because before you can analyze your competitors, you have to investigate them. Here's how to write the competitor analysis section of the business plan.

First, Find Out Who Your Competitors Are

If you're planning to start a small business that's going to operate locally, chances are you already know which businesses you're going to be competing with. But if not, you can easily find out by doing an internet search for local businesses, looking in the online or printed local phone book, or even driving around the target market area. 

Your local business may also have non-local competitors that you need to be aware of.

If you're selling office supplies, for instance, you may also have to compete with big-box retailers within a driving distance of several hours and companies that offer office supplies online. You want to make sure that you identify all your possible competitors at this stage.

Then Find Out About Them

You need to know:

  • what markets or market segments your competitors serve;
  • what benefits your competitors offer;
  • why customers buy from them;
  • as much as possible about their products and/or services, pricing, and promotion.

Gathering Information for Your Competitor Analysis

A visit is still the most obvious starting point - either to the brick and mortar store or to the company's website. Go there, once or several times, and look around. Watch how customers are treated. Check out the prices.

You can also learn a fair bit about your competitors from talking to their customers and/or clients - if you know who they are. Other good "live" sources of information about competitors include a company's vendors or suppliers and a company's employees. They may or may not be willing to talk to you, but it's worth seeking them out and asking.

And watch for trade shows that your competitors may be attending. Businesses are there to disseminate information about and sell their products or services; attending and visiting their booths can be an excellent way to find out about your competition.

You'll also want to search for the publicly available information about your competitors. Online publications, newspapers, and magazines may all have information about the company you're investigating for your competitive analysis. Press releases may be particularly useful. 

Once you've compiled the information about your competitors, you're ready to analyze it. 

Analyzing the Competition

Just listing a bunch of information about your competition in the competitor analysis section of the business plan misses the point. It's the analysis of the information that's important.

Study the information you've gathered about each of your competitors and ask yourself this question: How are you going to compete with that company?

For many small businesses, the key to competing successfully is to identify a market niche where they can capture a  specific target market  whose needs are not being met.

  • Is there a particular segment of the market that your competition has overlooked?
  • Is there a service that customers or clients want that your competitor does not supply? 

The goal of your competitor analysis is to identify and expand upon your competitive advantage - the benefits that your proposed business can offer the customer or client that your competition can't or won't supply.

Writing the Competitor Analysis Section

When you're writing the business plan, you'll write the competitor analysis section in the form of several paragraphs. 

The first paragraph will outline the competitive environment, telling your readers who your proposed business's competitors are, how much of the market they control and any other relevant details about the competition.

The second and following paragraphs will detail your competitive advantage, explaining why and how your company will be able to compete with these competitors and establish yourself as a successful business.

Remember; you don't have to go into exhaustive detail here, but you do need to persuade the reader of your business plan that you are knowledgeable about the competition and that you have a clear, definitive plan that will enable your new business to successfully compete.

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How to create a competitive analysis (with examples)

How to create a competitive analysis (with examples) article banner image

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.

Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up. 

What is a competitive analysis?

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. 

[inline illustration] What is a competitive analysis (infographic)

Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape. 

What to include in a competitive analysis

The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:

A description of your company’s target market

Details about your product or service versus the competitors’

Current and projected market share, sales, and revenues

Pricing comparison

Marketing and social media strategy analysis

Differences in customer ratings

You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.

How to do a competitive analysis

Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.

1. Create a competitor overview

In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.

Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.

2. Conduct market research

Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .

Primary market research may include: 

Purchasing competitors’ products or services

Interviewing customers

Conducting online surveys of customers 

Holding in-person focus groups

Secondary market research may include:

Examining competitors’ websites

Assessing the current economic situation

Identifying technological developments 

Reading company records

Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website. 

3. Compare product features

The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:

Service offered

Age of audience served

Number of features

Style and design

Ease of use

Type and number of warranties

Customer support offered

Product quality

Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.

4. Compare product marketing

The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan . 

Areas you’ll want to analyze include:

Social media

Website copy

Press releases

Product copy

As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:

What story are they trying to tell?

What value do they bring to their customers?

What’s their company mission?

What’s their brand voice?

Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics. 

5. Use a SWOT analysis

Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.

During a SWOT analysis, ask yourself:

What do we do well?

What could we improve?

Are there market gaps in our services?

What new market trends are on the horizon?

Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.

6. Identify your place in the market landscape

The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market. 

For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors. 

This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape. 

[inline illustration] Identify your place in the market landscape (infographic)

Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short. 

Competitive analysis example

Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:

Step 1: Use Google to compile a list of your competitors. 

Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company. 

Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses. 

Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence. 

After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out. 

[inline illustration] Competitive analysis framework (example)

You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.

Drawbacks of competitive analysis

There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner. 

Don’t forget to take action

You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .

Be wary of confirmation bias

Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.

Update your analysis regularly

A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times. 

Boost your marketing strategy with competitive analysis

Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.

Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.

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What Is a Competitive Advantage?

  • How It Works

Competitive Advantage Areas

  • How to Build It
  • Comparative Advantage

The Bottom Line

  • Business Essentials

Competitive Advantage Definition With Types and Examples

how to write competitive advantage in business plan

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

how to write competitive advantage in business plan

Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals. Competitive advantages are attributed to a variety of factors including cost structure, branding , the quality of product offerings, the  distribution network , intellectual property, and customer service.

Key Takeaways

  • Competitive advantage is what makes an entity's products or services more desirable to customers than that of any other rival.
  • Competitive advantages can be broken down into comparative advantages and differential advantages.
  • Comparative advantage is a company's ability to produce something more efficiently than a rival, which leads to greater profit margins.
  • A differential advantage is when a company's products are seen as both unique and of higher quality, relative to those of a competitor.

Investopedia / Michela Buttignol

Understanding Competitive Advantage

Competitive advantages generate greater value for a firm and its shareholders because of certain strengths or conditions. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. The two main types of competitive advantages are comparative advantage and differential advantage.

A comparative advantage is when a firm can produce products more efficiently and at a lower cost than its competitors.

A differential advantage is when a firm's products or services differ from its competitors' offerings and are seen as superior. Advanced technology, patent-protected products or processes, superior personnel, and strong brand identity are all drivers of differential advantage. These factors support wide margins and large market shares.

For example, Apple is famous for creating innovative products, such as the iPhone, and supporting its market leadership with savvy marketing campaigns to build an elite brand. Another example is major drug companies. They can market branded drugs at high price points because they are protected by patents.

Competing on price can be effective, but if you slash prices too much you risk decreasing profit margins to an untenable level. Many firms opt instead to differentiate themselves in other ways, which helps preserve or expand their profit margin.

The term "competitive advantage" traditionally refers to the business world, but can also be applied to a country, organization, or even a person who is competing for something.

To build a competitive advantage, a company can use one of three main methods:

  • Cost: Provide offerings at the lowest price
  • Differentiation: Provide offerings that are superior in quality, service, or features
  • Specialization: Provide offerings narrowly tailored to a focused market

How to Build a Competitive Advantage

To build a competitive advantage, a company must know what sets it apart from its competitors and then focus its message, service, and products with that difference in mind. Here are several strategies companies use to build a competitive advantage:

  • Research the market : Market research helps a company identify and define its target market, which can guide it in developing the most effective advantage.
  • Identify strengths : A company can find its unique strengths, especially relative to competitors, by reviewing products, services, features, positioning, and branding.
  • Evaluate finances : Companies can take a close look at their financial performance to spot profit centers and areas of stability, using financial statements and ratios.
  • Review operations : How efficient is a company's operations? Where is it effective, and where is there room for improvement? Consider customer service as well as production and supply chain management.
  • Research and development (R&D): Securing intellectual property prohibits competitors from using processes or know-how that the company can use to produce products competitors can't legally copy.
  • Consider human resources : The talent a company can attract as employees and leadership can make an important difference in the success of the business. Evaluating company culture, hiring, and staffing practices can help.

Competitive Advantage vs. Comparative Advantage

A firm's ability to produce a good or service more efficiently than its competitors, which leads to greater profit margins, creates a comparative advantage. Rational consumers will choose the cheaper of any two perfect substitutes offered.

For example, a car owner will buy gasoline from a gas station that is 5 cents cheaper than other stations in the area. For imperfect substitutes, like Pepsi versus Coke, higher margins for the lowest-cost producers can eventually bring superior returns.

Economies of scale , efficient internal systems, and geographic location can also create a comparative advantage.

Comparative advantage does not imply a better product or service. It only shows the firm can offer a product or service of the same value at a lower price.

For example, a firm that manufactures a product in China may have lower labor costs than a company that manufactures in the U.S., so it can offer an equal product at a lower price. In the context of international trade economics, opportunity cost determines comparative advantages. 

Amazon ( AMZN ) is an example of a company focused on building and maintaining a comparative advantage. The e-commerce platform has a level of scale and efficiency that is difficult for retail competitors to replicate, allowing it to rise to prominence largely through price competition.

How Do I Know if a Company Has a Competitive Advantage?

If a business can increase its market share through increased efficiency or productivity, it will have a competitive advantage over its competitors.

How Can a Company Increase Its Competitive Advantage?

Lasting competitive advantages tend to be things competitors cannot easily replicate or imitate. Warren Buffet calls sustainable competitive advantages economic moats , which businesses can figuratively dig around themselves to entrench competitive advantages. This can include strengthening one's brand, raising barriers to new entrants (such as through regulations), and the defense of intellectual property.

Why Do Larger Companies Often Have Competitive Advantages?

Competitive advantages that accrue from economies of scale typically refer to supply-side advantages, such as the purchasing power of a large restaurant or retail chain. But advantages of scale also exist on the demand side—they are commonly referred to as  network effects . This happens when a service becomes more valuable to all of its users as the service adds more users. The result can often be a winner-take-all dynamic in the industry.

How Is Competitive Advantage Different From Comparative Advantage?

Comparative advantage mostly refers to international trade. It posits that a country should focus on what it can produce and export relatively the cheapest—thus if one country has a competitive advantage in producing both products A & B, it should only produce product A if it can do it better than B and import B from some other country.

A company's competitive advantage is the way it excels compared to its rivals. This advantage may be through cost leadership, differentiation, or focus. Identifying a company's competitive advantage helps show how it is positioned to be more successful than its competitors, creating more revenue and generating greater profits.

how to write competitive advantage in business plan

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How to Write the Competitive Analysis of a Business Plan

Written by Dave Lavinsky

Competition in business plan

If you are writing a business plan, hopefully by this point you’ve conducted thorough market research to identify industry trends and identified the target market for your business. Now it’s time to conduct a competitor analysis. This section is included in virtually every simple business plan template , and the information you include will depend on several factors such as how many competitors there are, what they offer, and how large they are in comparison to your company.

Download our Ultimate Business Plan Template here

What is a Competitive Analysis?

A competitive analysis is a type of market research that identifies your competitors, their strengths and weaknesses, the strategies they are using to compete with you, and what makes your business unique. Before writing this section it’s important to have all the information you collected during your market research phase. This may include market data such as revenue figures, cost trends, and the size of the industry.

Why Do You Need the Competitive Analysis?

If you are planning to raise capital, the investor will require a business plan that includes the competitive analysis section. This section will also come in handy while writing a business plan template , if your company is considering increasing prices or adding new products and services. You can use the information you find to determine how well-positioned your business is to perform in the competitive landscape.

3 Steps to Writing a Competitive Analysis

The steps to developing the competitive analysis section of your business plan include:

  • Identify your competition.
  • Select the appropriate competitors to analyze.
  • Determine your competitive advantage.

1. Identify Your Competition

To start, you must align your definition of competition with that of investors. Investors define competition as to any service or product that a customer can use to fulfill the same need(s) as the company fulfills. This includes companies 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.

When identifying competitors, companies often find themselves in a difficult position. On one hand, you may want to show that the business is unique (even under the investors’ broad definition) and list few or no 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 base of potential customers to support the company’s products and/or services.

2. Select the Appropriate Competitors to Analyze

Once your competition has been identified, you want to consider selecting the most appropriate competitors to analyze. Investors will expect that not all competitors are “apples-to-apples” (i.e., they do not offer identical products or services) and therefore will understand if you chose only companies that are closest in nature. So, you must detail both direct and, when applicable, indirect competitors.

Direct competitors are those that serve the same potential customers with similar products and services. If you sell your products or services online, your direct competitors would also include companies whose website ranks in the top 5 positions for your same target keyword on Google Search.

For example, if you are a home-based candle-making company , you would consider direct competitors to be other candle makers that offer similar products at similar prices. Online competitors would also include companies who rank for the following keywords: “homemade candles”, “handmade candles”, or “custom candles.”

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.

In some cases, you can identify indirect competitors by looking at alternative channels of distribution. For example, a small business selling a product online may compete with a big-box retailer that sells similar products at a lower price.

After selecting the appropriate competitors, you must describe them. In doing so, you must also objectively analyze each of their strengths and weaknesses and the key drivers of competitive differentiation in the same market.

For each competitor, perform a SWOT Analysis and include the following information:

  • Competitor’s Name
  • Overview of Competitor (where are they located; how long have they been operating)
  • Competitor’s Product or Service
  • Competitor’s Pricing
  • Estimated Market Share
  • Location(s)
  • Potential Customers (Geographies & Segments)
  • Competitor’s Strengths
  • Competitor’s Weaknesses

By understanding what your competitors offer and how customers perceive them, you can determine your company’s competitive advantage against each competitor.

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3. Determine Your Competitive Advantage

Perhaps most importantly, you must describe your company’s competitive advantages over the other companies in the space, and ideally how the company’s business model creates barriers to entry. “Barriers to entry” are reasons why it would be difficult for new companies to enter into or compete in the same market.

For instance, you may have a patent that provides value to your customers and makes them less likely to switch suppliers, which protects your business from potential competitors. Or, you may have more resources than the competition and thus be able to provide superior customer service.

Below is a list of areas in which you might have a competitive advantage:

  • Size of the Company – Large companies have more resources and can usually offer lower prices than smaller businesses. This is a significant barrier to entry, as starting a small business and competing with a larger company may be difficult.
  • Product or Service Differentiation – If your product or service is unique in some way, this will make it less likely that customers will switch to a competitor.
  • Experience & Expertise – Experience and knowledge are valuable attributes that can help differentiate you from the competition.
  • Location – If you are located in an area where there is high demand for your product or service, this can be a barrier to entry because competitors will not want to open new locations.
  • Patents & Copyrights – Protecting intellectual property can prevent others from entering the same market and competing with your company.
  • Brand Recognition – Customers are loyal to brands they have come to trust, which protects the company from new competitors.
  • Customer Service – Providing excellent customer service can help you retain customers and prevent them from switching suppliers.
  • Lowest Cost Offerings – If you can offer a lower price than your competitors, this makes it more difficult for them to compete with you.
  • Technology – New technology that enables you to provide a better product or service than your competitors can be an advantage.
  • Strategic Partnerships & Alliances – Collaborating with a company that your customers want to work with can help keep them from switching.
  • Human Resources – If you have a highly skilled and talented workforce, it can be difficult for competitors to find and employ the same skills.
  • Operational Systems – Strong operational systems that lead to greater efficiencies can protect your business from the competition.
  • Marketing Strategy – Investing in strong marketing campaigns can make your business difficult to compete with.

For instance, you could say that your [enter any of the bullets from above] is better than your competitors because [insert reason].

The competitive landscape is one of the most important considerations in developing a business plan since it sets the stage by providing information on past and current competitors and their respective strengths and weaknesses. A strong understanding of the competitive landscape is needed before you can develop a strategy for differentiating your company from the competition. Follow the above competitive analysis example and you will be well-prepared to create a winning competitor analysis section of your business plan.

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Other Resources for Writing Your Business Plan

How to Write a Great Business Plan Executive Summary

How to Expertly Write the Company Description in Your Business Plan

The Customer Analysis Section of Your Business Plan

How to Write the Market Analysis Section of a Business Plan

The Management Team Section of Your Business Plan

Financial Assumptions and Your Business Plan

How to Create Financial Projections for Your Business Plan

Everything You Need to Know about the Business Plan Appendix

Business Plan Conclusion: Summary & Recap

Other Helpful Business Plan Articles & Templates

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  • How to Write a Great Business Plan: Competitive Analysis

The seventh in a comprehensive series to help you craft the perfect business plan for your startup.

How to Write a Great Business Plan: Competitive Analysis

This article is part of a series on  how to write a great business plan .

The Competitive Analysis section of your business plan is devoted to analyzing your competition--both your current competition and potential competitors who might enter your market.

Every business has competition. Understanding the strengths and weaknesses of your competition--or potential competition--is critical to making sure your business survives and grows. While you don't need to hire a private detective, you do need to thoroughly assess your competition on a regular basis even if you only plan to run a small business.

In fact, small businesses can be especially vulnerable to competition, especially when new companies enter a marketplace.

Competitive analysis can be incredibly complicated and time-consuming... but it doesn't have to be. Here is a simple process you can follow to identify, analyze, and determine the strengths and weaknesses of your competition.

Profile Current Competitors

First develop a basic profile of each of your current competitors. For example, if you plan to open an office supply store you may have three competing stores in your market.

Online retailers will also provide competition, but thoroughly analyzing those companies will be less valuable unless you also decide you want to sell office supplies online. (Although it's also possible that they--or, say, Amazon--are your real competition. Only you can determine that.)

To make the process easier, stick to analyzing companies you will directly compete with. If you plan to set up an accounting firm, you will compete with other accounting firms in your area. If you plan to open a clothing store, you will compete with other clothing retailers in your area.

Again, if you run a clothing store you also compete with online retailers, but there is relatively little you can do about that type of competition other than to work hard to compete in other ways: great service, friendly salespeople, convenient hours, truly understanding your customers, etc.

Once you identify your main competitors, answer these questions about each one. And be objective. It's easy to identify weaknesses in your competition, but less easy (and a lot less fun) to recognize where they may be able to outperform you:

  • What are their strengths? Price, service, convenience, extensive inventory are all areas where you may be vulnerable.
  • What are their weaknesses? Weaknesses are opportunities you should plan to take advantage of.
  • What are their basic objectives? Do they seek to gain market share? Do they attempt to capture premium clients? See your industry through their eyes. What are they trying to achieve?
  • What marketing strategies do they use? Look at their advertising, public relations, etc.
  • How can you take market share away from their business?
  • How will they respond when you enter the market?

While these questions may seem like a lot of work to answer, in reality the process should be fairly easy. You should already have a feel for the competition's strengths and weaknesses... if you know your market and your industry.

To gather information, you can also:

  • Check out their websites and marketing materials. Most of the information you need about products, services, prices, and company objectives should be readily available. If that information is not available, you may have identified a weakness.
  • Visit their locations. Take a look around. Check out sales materials and promotional literature. Have friends stop in or call to ask for information.
  • Evaluate their marketing and advertising campaigns. How a company advertises creates a great opportunity to uncover the objectives and strategies of that business. Advertising should help you quickly determine how a company positions itself, who it markets to, and what strategies it employs to reach potential customers.
  • Browse. Search the Internet for news, public relations, and other mentions of your competition. Search blogs and Twitter feeds as well as review and recommendation sites. While most of the information you find will be anecdotal and based on the opinion of just a few people, you may at least get a sense of how some consumers perceive your competition. Plus you may also get advance warning about expansion plans, new markets they intend to enter, or changes in management.

Keep in mind competitive analysis does more than help you understand your competition. Competitive analysis can also help you identify changes you should make to your business strategies. Learn from competitor strengths, take advantage of competitor's weaknesses, and apply the same analysis to your own business plan.

You might be surprised by what you can learn about your business by evaluating other businesses.

Identify Potential Competitors

It can be tough to predict when and where new competitors may pop up. For starters, regularly search for news on your industry, your products, your services, and your target market.

But there are other ways to predict when competition may follow you into a market. Other people may see the same opportunity you see. Think about your business and your industry, and if the following conditions exist, you may face competition does the road:

  • The industry enjoys relatively high profit margins
  • Entering the market is relatively easy and inexpensive
  • The market is growing--the more rapidly it is growing the greater the risk of competition
  • Supply and demand is off--supply is low and demand is high
  • Very little competition exists, so there is plenty of "room" for others to enter the market

In general terms, if serving your market seems easy you can safely assume competitors will enter your market. A good business plan anticipates and accounts for new competitors.

Now distill what you've learned by answering these questions in your business plan:

  • Who are my current competitors? What is their market share? How successful are they?
  • What market do current competitors target? Do they focus on a specific customer type, on serving the mass market, or on a particular niche?
  • Are competing businesses growing or scaling back their operations? Why? What does that mean for your business?
  • How will your company be different from the competition? What competitor weaknesses can you exploit? What competitor strengths will you need to overcome to be successful?
  • What will you do if competitors drop out of the marketplace? What will you do to take advantage of the opportunity?
  • What will you do if new competitors enter the marketplace? How will you react to and overcome new challenges?

The Competitive Analysis section for our cycling rental business could start something like this:

Primary Competitors

Our nearest and only competition is the bike shops in Harrisonburg, VA. Our next closest competitor is located over 100 miles away.

The in-town bike shops will be strong competitors. They are established businesses with excellent reputations. On the other hand, they offer inferior-quality equipment and their location is significantly less convenient.

Secondary Competitors

We do not plan to sell bicycles for at least the first two years of operation. However, sellers of new equipment do indirectly compete with our business since a customer who buys equipment no longer needs to rent equipment.

Later, when we add new equipment sales to our operation, we will face competition from online retailers. We will compete with new equipment retailers through personalized service and targeted marketing to our existing customer base, especially through online initiatives.

Opportunities

  • By offering mid- to high-end quality equipment, we provide customers the opportunity to "try out" bikes they may wish to purchase at a later date, providing additional incentive (besides cost savings) to use our service.
  • Offering drive-up, express rental return services will be seen as a much more attractive option compared to the hassle of renting bikes in Harrisonburg and transporting them to intended take-off points for rides.
  • Online initiatives like online renewals and online reservations enhances customer convenience and positions us as a cutting-edge supplier in a market largely populated, especially in the cycling segment, by customers who tend to be early technology adapters.
  • Renting bikes and cycling equipment may be perceived by some of our target market as a commodity transaction. If we do not differentiate ourselves in terms of quality, convenience, and service, we could face additional competition from other entrants to the market.
  • One of the bike shops in Harrisonburg is a subsidiary of a larger corporation with significant financial assets. If we, as hoped, carve out a significant market share, the corporation may use those assets to increase service, improve equipment quality, or cut prices.

While your business plan is primarily intended to convince you that your business makes sense, keep in mind most investors look closely at your competitive analysis. A common mistake made by entrepreneurs is assuming they will simply "do it better" than any competition.

Experienced businesspeople know you will face stiff competition: showing you understand your competition, understand your strengths and weaknesses relative to that competition, and that you understand you will have to adapt and change based on that competition, is critical.

And, even if you do not ever plan to seek financing or bring in investors, you absolutely must know your competition.

The Competitive Analysis section helps you answer the "Against who?" question.

Next time we'll look at another major component in a business plan: how you will set up your Operations .

More in this series:

  • How to Write a Great Business Plan: Key Concepts
  • How to Write a Great Business Plan: the Executive Summary
  • How to Write a Great Business Plan: Overview and Objectives
  • How to Write a Great Business Plan: Products and Services
  • How to Write a Great Business Plan: Market Opportunities
  • How to Write a Great Business Plan: Sales and Marketing
  • How to Write a Great Business Plan: Operations
  • How to Write a Great Business Plan: Management Team
  • How to Write a Great Business Plan: Financial Analysis

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Business plan tips competitive advantage

Business plan tips: how to identify your competitive advantage

Morgan Beall October 23, 2017

                        Morgan Beall October 23, 2017

At Vancity, we see hundreds of business plans each year from new and aspiring entrepreneurs. And from that experience, we know there are five areas in the business plan that entrepreneurs may not spend enough time on: business objective , SWOT analysis , cash flow projection , competitive advantage and market potential .

In this series, I’m going to share some tips on each of these five areas to get your business plan in top shape. In this post, I’ll cover ways to identify your competitive advantage.

Competitive advantage

What makes your business special? What are you doing differently than your competitors? Why should customers choose your product or service? These are the questions you should ask yourself when determining your competitive advantage. It’s something that often gets overlooked in many business plan s , but understanding your competitive advantage is a huge factor in starting and running a successful business.

https://youtube.com/watch?v=Nid9Frjiz3w

These three steps will help you realize what sets you apart from the rest:

1. Identify your competitors

Start by making a list of your direct and indirect competitors. Not sure who they are? Direct competitors are businesses that satisfy a similar need that you fulfill. Try Google searches and check online business listings in your area. If you are planning on setting up a physical location, walk the community around where your business will be. Even if there don’t appear to be other businesses directly competing with you, there are always other businesses competing for your customer’s time and money. Ask yourself who they are and what products or services are they selling?

2. Find their strengths and weaknesses

Identify what your competitors are doing right. Do a little research to determine what hooks people on their product or service. Next, identify what they’re doing wrong. What’s keeping people from shopping with them? What turns customers off? Make time in your calendar to observe and take notes, or go online and check out website, product and service reviews and see what past customers have had to say.

3. Figure out your “special ingredient”

Lastly, use the information you learned about your competitors to determine your own “special ingredient.” What makes your business stand out? Think about how your values align with your audience, your branding, story, and who you are as a business owner. Consider your customer service, the quality of your products, and where you source your materials from. You may have one very obvious special ingredient, or you may find you have a few special ingredients.

In essence, your competitive advantage is a compelling argument for why a customer should buy your product or service over someone else’s. It’s a vital part of your business plan that helps a financial institution, and your future customers, decide to invest in YOU.

Looking for more support?

Looking for more support to help you complete your business plan? Find out when our next Each One, Grow One small business workshop is happening. The workshop is offered free for members and non-members, and are a great starting place to create your perfect business plan.

Related posts

Business plan tips: how to clarify your business objective, business plan tips: why you need a swot analysis.

  • Business plan tips: how to plan a cash flow projection
  • Business plan tips: how to figure out your market potential

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  • Write Your Business Plan | Part 1 Overview Video
  • The Basics of Writing a Business Plan
  • How to Use Your Business Plan Most Effectively
  • 12 Reasons You Need a Business Plan
  • The Main Objectives of a Business Plan
  • What to Include and Not Include in a Successful Business Plan
  • The Top 4 Types of Business Plans
  • A Step-by-Step Guide to Presenting Your Business Plan in 10 Slides
  • 6 Tips for Making a Winning Business Presentation
  • 3 Key Things You Need to Know About Financing Your Business
  • 12 Ways to Set Realistic Business Goals and Objectives
  • How to Perfectly Pitch Your Business Plan in 10 Minutes
  • Write Your Business Plan | Part 2 Overview Video
  • How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
  • How to Fund Your Business Using Banks and Credit Unions
  • How to Fund Your Business With an SBA Loan
  • How to Fund Your Business With Bonds and Indirect Funding Sources
  • How to Fund Your Business With Venture Capital
  • How to Fund Your Business With Angel Investors
  • How to Use Your Business Plan to Track Performance
  • How to Make Your Business Plan Attractive to Prospective Partners
  • Is This Idea Going to Work? How to Assess the Potential of Your Business.
  • When to Update Your Business Plan
  • Write Your Business Plan | Part 3 Overview Video
  • How to Write the Management Team Section to Your Business Plan
  • How to Create a Strategic Hiring Plan
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  • How to Build a Team of Outside Experts for Your Business
  • Use This Worksheet to Write a Product Description That Sells
  • What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
  • How to Raise Money With Your Business Plan
  • Customers and Investors Don't Want Products. They Want Solutions.
  • Write Your Business Plan | Part 4 Overview Video
  • 5 Essential Elements of Your Industry Trends Plan
  • How to Identify and Research Your Competition
  • Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
  • How to Identify Market Trends in Your Business Plan
  • How to Define Your Product and Set Your Prices
  • How to Determine the Barriers to Entry for Your Business
  • How to Get Customers in Your Store and Drive Traffic to Your Website
  • How to Effectively Promote Your Business to Customers and Investors
  • Write Your Business Plan | Part 5 Overview Video
  • What Equipment and Facilities to Include in Your Business Plan
  • How to Write an Income Statement for Your Business Plan
  • How to Make a Balance Sheet
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  • How to Use Financial Ratios to Understand the Health of Your Business
  • How to Write an Operations Plan for Retail and Sales Businesses
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  • What Technology Needs to Include In Your Business Plan
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How to Identify and Research Your Competition Emphasizing your competitive advantage is an essential part of any business plan.

By Eric Butow Oct 27, 2023

Key Takeaways

  • Why competitive analysis matters
  • Questions to ask about your industry
  • How to find similar companies

Opinions expressed by Entrepreneur contributors are their own.

This is part 3 / 9 of Write Your Business Plan: Section 4: Marketing Your Business Plan series.

Successful entrepreneurs are renowned for intuitively feeling a market's pulse, project trends before anyone else detects them, and identifying needs that even customers are unaware of. After you are famous, perhaps you can claim a similar psychic connection to the market. But for now, you'll need to reinforce your claims to market insight by presenting solid research in your plan.

Market research aims to understand the reasons consumers will buy your product. It studies consumer behavior, specifically how cultural, societal, and personal factors influence that behavior. For instance, market research aiming to understand consumers who buy in-line skates might study the cultural importance of fitness, the societal acceptability of marketing directed toward children and teens, and the effect of personal influences such as age, occupation, and lifestyle in directing a skate purchase.

Related: 4 Effective Ways To Accomplish This Missing Step That Most Entrepreneurs Overlook

Market research is often split into two varieties: primary and secondary. Primary research studies customers directly, whereas secondary research studies information others have gathered about customers. Primary research might be telephone interviews or online polls with randomly selected target group members. You can also study your own sales records to gather primary research. Secondary research might come from reports on other organizations' websites or blogs about the industry.

Conducting market research provides answers to those unknown elements. It will greatly reduce risk as you start your business. It will help you understand your competitive position and the strengths and weaknesses of your competitors. And it will improve your marketing and sales process."

Related: You Need Consumer Insights To Ensure The Success Of Your Business. Here Are Five Ways To Find Them.

Questions to Ask About Your Industry

To start preparing your industry analysis and outlook, dig up the following facts about your field:

  • What is your total industry-wide sales volume? In dollars? In units?
  • What are the trends in sales volume within your industry?
  • Who are the major players and your key competitors? What are they like?
  • What does it take to compete? What are the barriers to entry?
  • What technological trends affect your industry?
  • What are the main modes of marketing?
  • How does government regulation affect the industry?
  • In what ways are changing consumer tastes affecting your industry?
  • What are recent demographic trends affecting the industry?
  • How sensitive is the industry to seasons and economic cycles?
  • What are key financial measures in your industry (average profit margins, sales commissions, etc.)?

Related: 5 Essential Elements of Your Industry Trends Plan

How to Find Similar Companies

Find a close match when looking at comparable businesses (and their data). For comparative purposes, consider:

  • Companies of relative size.
  • Companies serving the same geographic area could be global if you plan to be a web-based business.
  • Companies with a similar ownership structure. If you are two partners, look for businesses run by a couple of partners rather than an advisory board of twelve.
  • Relatively new companies. While you can learn from long-standing businesses, they may be successful today because of their twenty-five-year business history and reputation.

You will want to use the data you have gathered to determine how much business you could do and to figure out how you will fit into and adapt to the marketplace.

Related: How to Make Your Business Stand Out

How To Do Original Research

One limitation of in-house market information is that it may not include exactly what you're looking for. For instance, if you'd like to consider offering consumers financing for their purchases, it's hard to tell how they'd like it since you don't already offer it.

You can get around this limitation by conducting original research—interviewing customers who enter your store, for example, or counting cars that pass the intersection where you plan to open a new location—and combining it with existing data. Follow these steps to spending your market research dollars wisely:

Determine what you need to know about your market. The more focused the research, the more valuable it will be.

  • Prioritize the results of the first step. You can't research everything, so concentrate on the information that will give you the best (or quickest) payback.
  • Review less expensive research alternatives. Small Business Development Centers and the Small Business Administration can help you develop customer surveys. Your trade association will have good secondary research. Be creative.
  • Estimate the cost of performing the research yourself. Keep in mind that with the internet you should not have to spend a ton of money. If you're considering hiring a consultant or a researcher, remember this is your dream, these are your goals, and this is your business.
  • Don't pay for what you don't need.

Related: The One Simple Task That Will Help Your Startup Succeed

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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A Guide to Competitive Analysis: It’s Not Just about Competitors

By Joe Weller | April 16, 2018 (updated February 13, 2024)

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If you were running a cross-country marathon, wouldn’t you want to know something of the terrain and expected weather conditions before you began? The same principle of preparation applies when starting and continuing a business. It’s not enough to focus on your own production and financial goals: You need to understand what’s happening around you, how others create goods or services, the economic forecast, changes in rules and regulations, and more. In other words, you need to conduct a competitive analysis. The thought of searching for and digesting the required information may seem overwhelming, but we make it easy.

In this article, we explain how to focus your analysis by first deciding what questions you want answered. Learn how to find current and potential competitors and how many of them you need to review. Then, we cover the specific aspects of your competitors that you need to consider as well as where to find more information about them. Marketing experts weigh in on how to maintain focus during analysis. We also offer free, downloadable competitive analysis templates to start you on your own information gathering and analysis.

What Is Competitor Analysis?

Competitor analysis (CA) is a process of identifying competitors and gauging their business and marketing strategies to understand both their strengths and weaknesses and those of your own business. Competitive analysis provides a higher-level perspective of the entire marketing landscape and competitive intelligence.

Babette Bensoussan

“Competitive analysis is the process of analyzing all collected information to derive some insight for reducing risk and making better decisions,” explains competitive intelligence expert and author Babette Bensoussan .

“It is about your broader competitive environment,” she says. “I always remind my clients that competitors make up only one element of a business’s competitive environment. Other elements include government, technology, buyers, and suppliers, to name a few that impact how well you can compete.”

What Is the Purpose of a Competitive Analysis?

Researching your competitive landscape is essential to business growth and survival, and helps you offer better products or services to customers. You should gain an understanding of how customers view your company, what you’re doing right, and what you’re doing wrong. Therefore, competitive analysis forms a crucial part of marketing plans to help you understand what differentiates your product or service. Particularly when applying for funding, competitive analysis provides valuable insight into business plans. However, competitive analysis offers much more:

  • Branding possibilities
  • Insight into how competitors design products and messages
  • SEO possibilities
  • CRO (conversion rate optimization)
  • GTM strategies
  • User experience (UX) advantages of your and others’ products and websites
  • Gaps in the market
  • New products and services to develop
  • Market trends

According to a Conductor survey , 60 percent of marketers don’t feel proficient in competitive analysis. Many don’t practice it on a regular basis. Knowledge derived from these exercises is critical, and you need to assess competition regularly. Nevertheless, marketing departments often skip competitive analysis, which leaves them with a fragmentary understanding of the landscape and competitors. Being proactive can help you anticipate and prepare for competitor developments and provide you with the agility to take advantage of changes.

According to Bensoussan, “In today’s world of constant change and information overload (whether the information be real or fake), it is critical for any business person to understand the competitive landscape and the forces that impact the profitability and viability of a business.”

What Should Be Included in a Competitive Analysis?

In most cases, a competitive analysis contains a few basic sections, which may vary depending on the size and form of your company and the focus of your analysis:

  • A list of your main competitors
  • An overview or what you know about them
  • Who their target customers are
  • A list of their products or services
  • What media they use to market their goods and services
  • Their current and past marketing strategies
  • Their value proposition and effectiveness
  • An analysis of all of the strengths and weaknesses of your competition (and your own company)
  • An overview of the strategies being used by the competition to achieve their objectives
  • An overview of the market and projections for the future

How to Prepare for a Competitive Analysis

One of the crucial prerequisites for a successful competitive analysis is an open mind. Check your beliefs at the door — what you think about your company, your customers, or your competitors isn’t necessarily true. That can be a good thing.

In addition, it is vital to understand why you are conducting an analysis. What are your goals for the business? What are your goals for this analysis? “Always, always be very clear as to what the decision you will be making is all about,” advises Bensoussan. “If you are not clear about your decision, then you will never know if you have good competitive analysis or just some more information.”

She offers these two questions as examples of how different the impact of each answer can be: “Tell me who’s who in the [manufacturing] of zippers?” versus “Should I enter the zipper-manufacturing industry, and can I achieve a return on investment of, say, 15 percent in three years?”

“Which question would help you the most in delivering good quality CA? Which outcome do you think would provide the most value?” Bensoussan asks.

Companies often enlist the help of outside consulting firms dedicated to conducting competitive intelligence research. Guidance on competitive intelligence support, such as database information, software platforms for market program tracking, and more is available through the Society of Competitive Intelligence Professionals .

Competitor Analysis Frameworks

Over the decades, marketing gurus have developed or advocated several competitive analysis frameworks. Here are six well-known methods to consider.

  • Porter’s Five Forces Model: First published in 1979 by Harvard Business School professor Michael Porter, the Five Forces model provides a view beyond competitors to factors in your industry landscape that may threaten or strengthen your position. The Five Forces include the following:

Five Forces Model

  • Potential New Entrants: Consider how much money, time, and effort it would take for a company to displace you.
  • Competitive Rivalry: Determine who your competitors are, who the closest competitors are, and their products, prices, and quality. Fewer rivals mean more opportunity for your unique qualities to shine; many rivals mean more competitors to steal your customers and potentially better deals to lead customers elsewhere.
  • Suppliers: The more potential suppliers you have, the better for you. Consider how having fewer suppliers might impact your operation.
  • Buyers: If you have many customers, you have the power. Otherwise, buyers can negotiate more advantageous deals elsewhere or find sources other than yours. Consider how you would treat that situation.
  • Substitutes (or Complements): A competitor could create a product or model that replaces yours. On the other hand, a new product or service could also complement yours, which would create a symbiotic sales situation. Complements are sometimes considered the sixth force in the model.

Porter stressed the importance of not confusing these constants with temporary disruptions, such as technological innovations or government interventions in industry.

You can download the Five Forces model below to answer your own questions about an industry or business proposition.

Five Force Model

Download Five Forces Model

Excel  |  PDF

Industry Life Cycle Overview: Both industries and individual products have life cycles, which reflect the state of sales, whether robust or diminishing. Understand which stage of the life cycle your industry, company, or product is in to help target your marketing efforts. Product life cycles contain such stages as these:

Product Life Cycle

  • Introduction: At the introductory stage, a new industry or product is not well known or proven. It is usually marketed to a few early adopters. Because resources focus on product development, testing, and refinement, few or no profits accrue. Marketing focuses on explaining the product, creating awareness around it, and establishing a niche.
  • Growth: As awareness grows and the industry or product becomes established, profits may also grow. However, in the growth stage, rival products may also appear. Although improvements require funds, production efficiencies may also develop. Some products have only a short growth phase. For example, a particular fashion may last for only one season. Other products experience a long or extended growth phase, such as software products, which continue their usefulness through upgrades. During the growth stage, marketing centers on differentiating the product, so it stands out from competing products.
  • Maturity: In the maturity stage of a product or industry, sales may expand, but at a less accelerated rate. Fewer competitors may dominate the market and may attempt to differentiate on quality or increase sales by touting low costs.
  • Saturation: You reach the saturation stage when every customer who could buy the product already owns the product. A lack of innovation or competition from a superior product could result in saturation.
  • Decline/Termination: Industries and products decline for several reasons. Innovations may overtake them and render them obsolete. Businesses and product lines may fail to upgrade and innovate. At the decline or termination stage, companies may fold, continue in a smaller market, or merge with larger, successful businesses.  

Strategic Groups Analysis: You perform strategic groups analysis on companies within a business sector, such as automobiles, to see how they vie for their share of consumer expenditure. By dividing companies into strategic groups, you can understand how businesses of different sizes behave in the marketing landscape. Businesses within groups tend to be competitors, whereas businesses in other groups are related but not competitive. For example, running shoes and high-end women’s dress shoes are in different groups. Analyzing companies in this way can also reveal other significant information: direct competitors and their basis for competition; if and how a company can move to another group; and strategic problems and opportunities. Strategic groups are usually plotted on an x-y axis, where two highly relevant criteria form the axes. Here are some examples of criteria:

  • Brand ownership
  • Company size
  • Capacity utilization
  • Cost structure
  • Geographical market segmentation
  • Marketing activities
  • Ownership structure
  • Sales channels
  • Product diversity
  • Product quality
  • R&D capability
  • Vertical and horizontal integration

First, plot the companies where you think they belong on the graph. Now, with all companies plotted, create groupings. If you want, you can use larger or smaller circles to indicate market share. To gain greater insight, perform a Five Forces analysis on them, or consider the mobility barriers that prevent companies from shifting to other strategic groups.  

SWOT: Perhaps one of the most commonly addressed marketing analyses is SWOT (strengths, weaknesses, opportunities, and threats). In essence, SWOT represents what competitors do and do not do well. As you look at SWOT for competitors, also consider it for your own products and services.

  • Strengths: What do they do better than you? What are they known for? Is their pricing, inventory, convenience, and level of service better than yours?
  • Weaknesses: How do they fall short of your company’s standards? Can you leverage their shortcomings to improve your standing with customers?
  • Opportunities: What in your competitors’ landscape can you exploit to your advantage?
  • Threats: What in your competitors’ landscape threatens their business position?

Note that strengths and weaknesses focus on internal characteristics, while opportunities and threats concern external forces. SWOT can be performed separately, but it may provide a useful frame for studying a business’ products and services, marketing, and sales.  

Competitive Array: Competitive arrays, also known as competitive matrices , provide a way to quantify characteristics that may be unquantifiable. For example, if company A sells 500 widgets and company B sells 250, it’s clear which company sold more. But how do you quantify the attractiveness of online and print media or innovation? Creating the competitive array can be an individual or group exercise. To start, list your competitors across the top of your writing surface. In the left-most column, list important characteristics. Next, create a column for weighting the importance of each characteristic so that the sum of the characteristics totals one. The higher the weighting, the more important the characteristic (you may have a few characteristics with the same weight). Next, grade each competitor for each characteristic on a scale, such as from one to 10. Now, multiply the grade by the corresponding weight.  

Customer Service

0.1

5

0.5

7

3.5

Wide Distribution

0.3

5

1.5

2

3

Usable Design

0.4

6

2.4

6

14.4

White Glove Delivery

0.2

4

0.8

8

1.6

1.0

18

18

23

22.5

Competitive Value Proposition Analysis: The characteristics of a value proposition are exclusivity, clarity, and credibility. This method concerns how unique the product or service is, how clearly the product message is conveyed, and whether the message is credibly supported by evidence, such as testimonials, statistics, or test results. Because customers remember only a few key advantages of your product from your media promotion, the main value proposition must be correct and clear and mesh with your actual competitive advantage. To figure out how to differentiate your company, you must determine how competitors differentiate themselves from each other. POPs (points of parity), PODs (points of difference), and POIs (points of irrelevance) help you dissect value propositions.

  • Points of Parity (POPs): These are elements of customer benefit that both you and your competitors offer.
  • Points of Difference (PODs): These are features of customer benefit that you offer but competitors don’t. Keep in mind that not every point of difference is significant to consumers.
  • Points of Irrelevance (POIs): These are characteristics that customers don’t care about.

POP POD POI

Your unique value proposition (differentiating characteristics) doesn’t need to appeal to every customer. Don’t make your value proposition too general. You can’t be all things to all customers, just as you can’t do what your competitors are doing.

Sonia Schecter

Otherwise, there's no differentiation. You end up being like teenagers, everybody in the same jeans," says Sonia Schechter, Chief Marketing Officer of Marxent , a provider of virtual reality and augmented reality apps for furniture retailers. Therefore, target your message.

Discover your points of parity by using our POP template.

Points of Party POP POD POI

Download Points of Parity Template

Excel  |  Word  |  PDF

Who Are Your Competitors?

As a first step in competitive analysis, marketing guides typically suggest determining who your competitors are. Competitors can be divided into groups of direct competitors, indirect competitors, and future competitors.

  • Direct Competitor: These are companies who sell a direct substitute for your product, operate in the same geographic area, and/or offer the same goods (such as groceries) to the same market. Ask who your customers would buy from if you weren’t in business.
  • Indirect Competitor: These are companies in the same geographic area whose products occupy the same general, but not specific, category as your own (e.g., a general bakery versus a designer cake store). Indirect competition satisfies the customer’s need for a particular product or service, although that product or service may be different from yours. Similar products operating in different market segments do not represent direct competitors. For example, a high-end seafood restaurant doesn’t compete with a burger place.
  • Future Competitor: Future competitors may currently be indirect competitors who change and expand solutions. In the bakery example, the general bakery could hire a high-end designer to compete with the specialty cake maker. Or, the designer cake store could branch out into breads and muffins.

It may be difficult at first to envision what types of organizations you need to analyze and whether you need to analyze all competitors.To identify competitors, ask yourself who your customers would buy from if your product did not exist. Perhaps even more important, consider who your customers think your competitors are. How many competitors you review depends: If only a few companies do what you do, analyze everyone. If you have many competitors, use Pareto analysis to focus on the critical 20 percent. Larger businesses may analyze the top 10, whereas a small business can focus on three. Disregard online competitors unless you plan to sell online.

Pareto Chart Template

‌ Download Pareto Chart Template - Excel

How to Find Current Competitors

Some competitors may seem obvious, but sleuthing can reveal challengers you weren’t aware of.

  • Google search for a product or service similar to yours. Consider the companies in paid ads and organic returns.
  • Try SEMrush to check which domains are using which keywords.
  • Ask your current customers who they would choose besides you.
  • Check Alexa, Google Trends, or SimilarWeb for general estimates on the popularity of domain names and keywords.
  • Review Dun & Bradstreet for new incorporations.
  • Consult Derwent for new patent information.
  • See who has booths at trade shows.

How to Find Potential Competitors

While you consider the current playing field, you must also keep your eye on what’s coming around the corner. These are the future new entrants in your niche. Consider who might start a  business that would compete with yours. New competitors can be found in related markets, related technologies, or related products. Companies from other geographical areas with similar products may begin to sell in your area, and former employees or managers can start their own companies based on the themes of your business. In addition, consider the following conditions that may encourage competition:

  • A company gains competitive advantage.
  • Buyers are dissatisfied with suppliers.
  • An unmet demand for goods exists.
  • Few major barriers to entry exist.
  • The industry offers high profit margins.
  • The industry offers unrealized growth potential.
  • Competitive rivalry is not intense.

It’s Not All about Competitors ( Competitive Doesn’t Always Mean Competitor )

Depending on what your product or service is and where it is in its life cycle, a competitor focus may not be optimal. For example, for emerging technologies, no true competitor may exist.

“Looking too closely at competition is a massive distraction,” Schechter notes. “If you’re selling a commodity or established product, such as a drugstore, which sells the same thing anywhere, you’d be looking at specific issues, like price, location, and assortment.”

Schecter says marketers themselves often don’t understand that what the competition is doing is not important: “Successful marketing is how you define yourself in the landscape. People don’t care about a feature-by-feature description, or even one feature. They buy the package. They like you. You’re different or you’re solving a particular problem. A new business must define and lay out the landscape for the customer.”

To succeed, understanding what customers want is key. “Marketers have nuanced detail, and customers don’t care about that detail,” Schechter continues. “But, you have to listen to their questions and engage in dialogue with them to gain real understanding,” she points out. She cites Apple’s promotion of the camera in the first iPhone as an example of marketers understanding what — out of thousands of potential functions — was important to consumers. “B2B marketing is the same. It’s about listening to customers, figuring out how they’re shopping, and trying to see through their eyes,” Schechter emphasizes.

“Obsessing over competition can get you off track. If you’re listening to customers, you’ll build the right product. But you don’t need to build your dreams on other people’s ideas,” she concludes.

Where to Find Information for a Competitive Analysis

Remember that every department of your business is a potential source for information, including the following areas:

  • Sales: Questions for potential, current, and lost customers
  • Research and Development: New patents
  • Purchasing: Suppliers
  • Marketing: Customers and other consumers

Once you’ve determined who your competitors are and what you want to learn about them and from them, you need to go information hunting:

  • Visit offices or brick-and-mortar stores. What do they look like? Who’s there?
  • Get financial and organizational information from public filings and from sources like Hoovers, Manta, and Dun & Bradstreet.
  • Monitor PR Newswire for new developments and changes.
  • Some marketing platforms may actually include information about your competitors.

Interviews and Research Surveys

Interviewing competitor customers and consumers who know little about your business is important to overcoming your preconceptions about the business landscape. You probably have specific questions in mind, but here are the basics:

  • Why are you shopping for a solution?
  • What were the main reasons you chose the company you did?
  • Ranked from most important to least important, what are your five shopping criteria?

Media Scanning or Competitor Content Analysis

You can learn much about competitor products and messaging by scanning media. Media doesn’t just include online content (web pages, tweets, and Facebook posts) — it also includes such traditional marketing collateral as white papers, case studies, and data sheets. Moreover, consider reference materials, such as LexisNexis and Hoovers, and trade, business, or news publications for ads, news stories, and press releases. Media and content can reveal not only new products and new branding, but also new positioning and segmentation strategies, pricing, target markets, and promotion strategy.

What Information to Search for in Competitive Analysis

The approach to analysis depends on the questions requiring answers. To organize your analysis, divide it into three aspects: product or services, marketing, and sales. Each aspect contains its own questions and means of analysis.

Competitive Analysis Checklist

Products and Services

Your understanding of products and services must be thorough. Investigate the complete product or service line. Try to understand who your competitors’ customers are and what they need. Look at their pricing strategy and see if it differs for online and brick-and-mortar stores. Also, consider how they differentiate from their competitors.

Tracking competitor sales processes can involve more legwork. For public companies, SEC filings provide some financial information about growth or contraction, but, for private companies, information is less readily available. Information about sales channels may be easy to find through a look in the phone book or online. You can also gather details about the sale process by asking current customers why they chose your product over others. You can also acquire valuable information by following up even after you lose a sale in order to understand the customer’s thinking. What do their partner resales programs look like? What are their revenues versus sales volume?

Marketing Efforts in Competitive Analysis

What does the competitor marketing plan entail? How do competitors invest marketing efforts? What can you do even better? A variety of approaches can help you define competitor marketing strategy.

When you identify marketing assets, take a reasonable sample of items — no need to review all of them. Just remember to keep samples consistent among competitors. Also, when reviewing items, consider the quality of the collateral. It should appear professional, with no typos, and in the formal, professional, idiomatic voice. In addition, a solid library of resources, such as consistent blog posts, whitepapers, case studies, videos, webinars, and podcasts may point you to themes and leads you should follow.

E-Marketing Strategy Competitive Analysis

Few businesses today can function without a web presence that helps generate traffic and inquiries or purchases. Some statistics say that prospective buyers visit a website as many as nine times before purchasing and, depending on the product, visit multiple sites before purchasing. Forrester research after 2010 suggests potential customers visit three sites on average before buying. The more sites visited, the more money the customer intends to spend.

Therefore, understanding how your site compares to your nearest competitors can be helpful. To drive eyes to websites, online purveyors use search engine optimization (SEO) to employ the keywords most likely to garner high search ratings in Google (and other search engines). Marketers frequently also use SEM (search engine marketing) to promote a business or product by increasing visits to a website through paid keywords. Look at how saturated their content is with keywords and where they use keywords, whether in H1 and H2 tags, page titles, content, or links. Also, look at the difficulty level of their keywords.

Consider the usability of the steps in the sales funnel as well as the navigation. What do the  landing pages say? Also, look at backlinks (i.e., links from other pages to your competitor’s page) to your web page. See how many backlinks exist — and from which pages — to understand if this is something you can improve for your website.

Structure is important, but quality content also matters. Online marketing collateral appears as blogs, white papers, ebooks, case studies or user stories, videos, webinars, podcasts, and more. But words and pictures themselves are not valuable if they don’t offer any unique information or concise approaches to existing knowledge. Check whether content is shared and which topics attract attention, or, conversely, what that content and those topics are linked to. What do readers comment on, if they do comment? Who else is sharing what your competitors are publishing?

Social Media

Certain social media platforms appeal to some audiences more than others. The channels a company favors can reveal clues to the demographics of their target market. Make note of what social media buttons they include on pages and where on the page they include them.

Software Tools for Understanding Online Competitors

Marketing Research Tools

Besides monitoring content, you can monitor the mechanics of competitor websites to glean more data about how marketing strategy and product offerings are changing. Software helps to automate these investigations for you. Following are some of the many products available:

  • BuiltWith : See what platform was used to build a page.
  • Ghostery : Find trackers on a website.
  • SEMrush : Discover company rankings, organic keywords, AdWords, and analyses of backlinks.
  • Versionista : Track web page and website changes, SEO changes, and more.
  • Visualping : Monitor webpage updates.
  • SpyFu : Find competitor keywords and AdWords, including AdWord and keyword variations and history.
  • iSpionage : Track PPC and other keywords in competitor campaigns.
  • SimilarWeb : Compare competitor websites to your own.
  • Heatmaps: Use large amounts of data to provide a visual representation of how users interact with a website. Heatmaps can indicate where users click and look and for how long. Levels of intensity of activity are usually displayed through colors.
  • Session Recording Tools: Record user browsing sessions. Session recording tools can yield a wealth of rich data, but raise some privacy concerns.
  • Tag Management Systems: Advanced e-marketing implementations use tags to aid analysis and reporting. Tags are snippets of code that are usually added to the <head> tags of a web page.

Web Page User Testing for UX in Competitive Analysis

It’s essential to understand how consumers approach your website, especially for web-based products and marketing. Allow customers to test your site, and even view it yourself from a customer’s perspective, to help eliminate unnecessary steps and streamline your sales funnel. Doing so can also help to illuminate the opportunities for upsells and cross-sells.

Limiting the analysis to two or three competitors offers a manageable amount of insight into usability, which helps you avoid reviewer overload and confusion. For impartial results, don’t reveal to test participants which website is yours.

Ask test participants to enter words in Google or list the words and phrases they would use to find a certain product or service. Not only does this yield potentially fruitful keywords, it also indicates whether your site appears in search returns.

To get a sense of each participant’s impression, have them look at each website for five seconds and answer the following questions:

  • What three words would you use to describe the site?
  • What is it about? What products or services are offered and for whom?
  • How does this website make you feel?

To understand their process, give participants a task to perform on each website. Ask them to answer the following questions:

  • What was the worst thing about your visit to this website?
  • What aspects of the experience could be improved?
  • What did you like about the website?
  • What other comments do you have?
  • Which website did you like best and why?

How Much Data Do You Need in a Competitive Analysis?

It may seem overwhelming to sit down and search out your competitors’ business situations. That’s why setting a clear intention before you begin an analysis is so important. In addition, Babette Bensoussan advises that you don’t need to analyze everything:

“Over the years, I have learned that once you have 70 percent of the information required for your chosen analytical technique, you can proceed to the analysis,” she explains. “You never really need all the pieces of a jigsaw puzzle to tell you what the picture is. This same philosophy applies to analysis. More information may not yield better insights nor improve predictive accuracy.”

How Do I Write a Competitor Analysis Report?

The format of your analysis depends on individual choice and the audience. You may also choose to use one kind of format while you work through the analysis, and another when you present findings.

Take a sheet of paper. In the left-most column, write the names of your closest competitors. Across the top of the page, list the main attributes of each product, such as target market, price, size, method of distribution, extent of customer service, prospective buyers, and so on. Then, make a check or a note for each attribute the competitor fulfils. An additional column can contain information about service or product availability, the website, a toll-free phone number, and other general information.

A competitor profile helps you make a detailed record about each competitor, and also allows you to capture snapshots of a business over time. Consider listing some of the following information:

  • Location of offices and factories
  • Key personalities, history, and trends
  • Ownership, organizational structure, and corporate governance
  • Number of employees and skill sets
  • Management and management style
  • Compensation, benefits, and retention rates
  • Plant capacity, utilization rate, age of plant, capital investment
  • Product mix per plant and shipping logistics
  • Products and services
  • Depth of product line
  • New products developed and success rate
  • Research and development details
  • Brands and brand loyalty and awareness
  • Patents and licenses
  • Quality control conformance
  • Cash flow and liquidity
  • Profit growth profile
  • Method of growth (organic or acquisitive)
  • Objectives, mission statement, growth plans, acquisitions
  • Marketing strategies
  • Segments served, market shares, customer base, growth rate, and customer loyalty
  • Promotional mix, promotional budgets, advertising themes, ad agency used, online promotional strategy
  • Distribution channels (direct and indirect) and exclusivity agreements

Here is a step-by-step process for writing a competitor analysis report:

  • Write down your competitors.
  • Write what you know about them already.
  • Discover who their target customers are.
  • Discover their pricing methods.
  • Investigate their marketing strategy.
  • Figure out their competitive advantage.

Download our competitive analysis landscape template to get ideas for gathering information and reporting analysis results.

Competitive Analysis Landscape

Download Competitive Analysis Landscape Template

Excel  |  Word  |  PDF  | Smartsheet

Competitive Analysis for Small Businesses

Small business can be competitive. Beyond meeting financial targets, you need to understand the competitive landscape (short of allowing it to distract you) and then target a niche market.  Many of the same analyses that apply to large businesses also apply to small businesses. However, if this is your first business, or if you don’t have a marketing background, you may want to pay attention to a few aspects.

First, it is helpful to acknowledge how much or how little you know about your competitors by sketching a profile of your top two or three competitors. Next, try to learn all you can about your competition.

You can use the following template to perform a competitive analysis for your small business.

Small Business Competitive Analysis

Download Small Business Competitive Analysis Template

Word    |    PDF

What Is a Competitive Analysis in a Business Plan?

Competitive analysis should play a key role in the preparation of a business plan. Particularly if you seek outside funding, your knowledge of the competitive landscape will show your understanding of your business and the market forces at play.

When starting a business, consider all the analysis questions described above, but pay particular attention to issues of growth and opportunity. Consider addressing the following circumstances:

  • Whether current competitors target a specific niche or offer products to the mass market
  • If, how, and why competitors are growing or reducing business
  • How your company will be stronger than competitors and better able to exploit changes in the market landscape
  • What you will offer customers that no one else does (your competitive advantage)

In the business plan, describe the competitive landscape as it relates to direct and indirect competitors and opportunities and risks, emphasizing your competitive advantage. This competitive analysis can form the basis for your first marketing plan.

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How to Write a Business Plan: Step-by-Step Guide + Examples

Determined female African-American entrepreneur scaling a mountain while wearing a large backpack. Represents the journey to starting and growing a business and needi

Noah Parsons

24 min. read

Updated May 7, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

  • The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

  • Raise money
  • Grow strategically
  • Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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  • What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

  • A summary of the problem you are solving
  • A description of your product or service
  • An overview of your target market
  • A brief description of your team
  • A summary of your financials
  • Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

  • Supply chain management
  • Manufacturing processes
  • Equipment and technology
  • Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

  • A description of each task
  • The proposed due date
  • Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

  • Website launch date
  • Store or office opening date
  • First significant sales
  • Break even date
  • Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

  • Conversion rates
  • Customer acquisition costs
  • Profit per customer
  • Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

  • Sole proprietor
  • Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

  • Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
  • Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
  • Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
  • Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
  • Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

  • Company logo
  • Business name
  • Value proposition (optional)
  • Business plan title
  • Completion and/or update date
  • Address and contact information
  • Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

  • Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

  • Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
  • Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
  • Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
  • Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
  • Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

  • Did you meet your sales goals?
  • Is spending following your budget?
  • Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

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How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

  • Write a brief executive summary
  • Describe your products and services.
  • Conduct market research and compile data into a cohesive market analysis.
  • Describe your marketing and sales strategy.
  • Outline your organizational structure and management team.
  • Develop financial projections for sales, revenue, and cash flow.
  • Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

  • 1. Not taking the planning process seriously.
  • Having unrealistic financial projections or incomplete financial information.
  • Inconsistent information or simple mistakes.
  • Failing to establish a sound business model.
  • Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

  • How will your business make money?
  • Is there a need for your product or service?
  • Who are your customers?
  • How are you different from the competition?
  • How will you reach your customers?
  • How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Content Author: Noah Parsons

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Check out LivePlan

Table of Contents

  • Use AI to help write your plan
  • Common planning mistakes
  • Manage with your business plan
  • Templates and examples

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Home > Business Plan > Competitive Advantage in a Business Plan

competitive advantage

Competitive Advantage in a Business Plan

… but we have the following advantages …

A business is creating competitive advantage over its competitors when it can achieve higher the industry average profit margins on its products. This can happen due to a number of factors including cost advantages, and superior product offerings. The main objective of the business is the make the competitive advantage sustainable.

Superior product offerings or differential advantages occur when the business has a product which is perceived by the customers as substantially better than the competitors products.

Even if a competitor were able to make an almost identical product, your competitive advantages should enable the business to win, build and maintain market share in the chosen target market.

Competitive Advantage Examples

Examples of things which might give your business a competitive or unfair advantage include the following:

  • First to market
  • Barriers to entry
  • Available funds and working capital
  • Key partnerships and relationships
  • Access to expertise, special skills and talents
  • Distribution rights

Competitive Advantage Presentation

An investor will look to see if there is a sustained competitive edge, capable of further development, which will allow the business to build and hold market share.

This is part of the financial projections and Contents of a Business Plan Guide , a series of posts on what each section of a simple business plan should include. The next post in this series sets out details of the market share the business plans to win using its competitive edge.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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Identifying your competitive advantage and value proposition

To stay ahead, you must show the unique value your business offers. Understanding your customers and your competitors can help you develop your value proposition.

Find your competitive advantage in 3 steps

Your competitive advantage is the combination of marketing elements that sets your business apart. It's about the unique benefit customers get when they do business with you. Practical examples include:

  • free home delivery
  • a money-back guarantee
  • personalised service.

Finding your competitive advantage will help you to make the most of your existing strengths and to prioritise improvements. A strong competitive advantage will:

  • highlight customer benefits
  • reflect your business strengths
  • be clear, simple and unique
  • change over time to adapt to new conditions.

The following 3 steps can help you find your competitive advantage.

To uncover gaps in the market, you need to analyse and understand your customers and competitors. This will show why you're making sales (the drivers for your business) and the reasons why not (the barriers against your business).

Use the free market research kit and refer to your marketing strategy .

Action item: Know your customers

Ask yourself:

  • why do customers buy from my business?
  • why do customers buy from my competitors?
  • why do potential customers choose not to buy at all?

Thumbnail of competitor profile chart

Competitor profile chart

An easy way to better understand your competitors is to complete a competitor profile chart. It can show you:

  • where there are gaps in the market
  • how you can stand out from the competition.
  • download the print-optimised version of the competitor profile chart to fill out and save for future reference
  • use the online template to profile your competitors .

When customers buy a product or service, they actually buy the benefits they expect to get from it. They are buying the experience and the outcome.

How does your competitive advantage benefit your customers? For example:

  • do your products make their life simpler, or more exciting?
  • do your services make them feel better?

Remember that different benefits may appeal to different customers.

Imagine you're running an award-winning sandwich shop. You:

  • source fresh, chemical-free, local ingredients
  • make high-quality gourmet sandwiches to order.

Different customers will be attracted by different benefits. They may, for example:

  • like to have gourmet sandwiches for lunch
  • need sandwiches made to order to accommodate food allergies
  • want to support local growers and farmers.

It's about the customer

Find out what trends are shaping the market and what benefits your customers want. Then find practical ways to address those needs.

Action item: Determine your difference

Use our template for reviewing your 7 Ps of marketing to help identify:

  • the benefits you're offering
  • what makes your business unique.

While doing this, ask yourself:

  • how important are the added benefits you're offering to customers?
  • how well does your business offer these benefits compared to your competition?

Focus on, and promote, benefits:

  • that customers value
  • in areas where your business outperforms your competitors.

Check that your marketing collateral includes the most compelling benefits.

One way to stand out from your competitors is to innovate. Focus on solving problems, even problems your customers are not yet aware of. You could, for example, change existing or design new:

  • experiences
  • business processes.

Action item: Look at your customers' journey

Map out the end-to-end customer journey to see where customers might:

  • experience issues when doing business with you (pain points)
  • be pleasantly surprised or impressed (wow factors).

This will help you plan and make business improvements.

Clarify your customer value proposition (CVP)

Your marketing programs will be more focused and effective when you:

  • know what your competitive advantage is
  • have a unique and relevant brand positioning .

Improve this further by being clear about your customer value proposition (CVP).

A good CVP is a short, powerful statement about how you deliver value to your customers.

It answers the question:

What value do you promise to deliver to customers in exchange for payment?

A business typically has 1 value proposition. It's about the big picture—your main and consistent difference.

Your value proposition links your:

  • business plan (business model and operations)
  • target segments (customer needs and expectations).
  • is often used as a core statement in business plans and marketing strategy documents
  • guides external communication and how you go to market. For example, it will enable you to promote your difference, effectively pitch to stakeholders and increase sales conversion .

Use these 3 points to clarify your CVP:

  • You know how... (the problems)
  • Well, what we do... (our solutions)
  • In fact... (our wow factors)

Example CVP

Think about the sandwich shop offering a gourmet alternative to customers.

  • You know how… it's hard to find a quality sandwich at a reasonable price in our local area? Lunch time can become just another chore in your day.
  • Well, what we do… is ask you what you really want. We then make every sandwich to order using the best, chemical-free, locally sourced ingredients.
  • In fact… we get to know you by name—and your favourite sandwich. And we like to have a chat. That's all part of our award-winning service.

To write a more comprehensive CVP, answer these questions:

  • What are the problems we're solving for our customers?
  • What outcomes do they want to achieve?
  • What benefits do customers get from our products and services? This can be practical or emotional.
  • What sets our brand apart from the competition in terms of value? Why should customers choose and use our brand?

Think about the sandwich shop and how it compares to a chain of sandwich shops.

'Lunch time should be your time. Time to relax and enjoy. Time to get away from it all. Something to look forward to. But all too often it's the opposite of these things—more stress and heavy food. That's why our sandwiches are made with love, for what you love.

Choose your ingredients and we'll make every sandwich fresh to order.

You'll be supporting the local growers and farmers and you'll be supporting us, a family-owned business in the local community. You'll enjoy the friendly chat and the gourmet food, without the gourmet price. It's the award-winning service and taste that will keep you coming back.'

Business is about exchanging value. Value is based on what the customers thinks about the price they paid relative to the benefits they received. What will the answer be if a customer asks: What's in it for me (WIIFM)?

Read more about pricing products and services .

Keep the following in mind when you evaluate your customer value proposition:

  • existing business capability – current state
  • proposed enhancements – ideal future
  • the roadmap to get there – action plan.

how to write competitive advantage in business plan

Customer value proposition template

Develop your customer value proposition (CVP) by:

  • reading the information above
  • searching online for 'customer value proposition examples'
  • using the template to write your CVP .

Create unique selling points (USPs)

Based on your competitive advantage, you'll have one or more unique selling points (USPs).

  • is a short, snappy and memorable line
  • conveys what sets you apart from competitors
  • is mostly used for marketing communications
  • is also known as a 'unique selling proposition'.

Why should customers buy from you?

You'll need a USP, or a series of USPs, when you run a marketing campaign. You'll also need to add it to the creative brief if you partner with an agency .

The most effective way to stand out in a crowded market is with a unique selling point and a distinctive brand .

The USP must convey the benefit you deliver, relative to competitors, that your target persona values most. This benefit may be real or perceived.

You'll likely need many versions of your USPs, depending on your:

  • products and services
  • target segments
  • direct competitors.

To create and deliver high-impact marketing communications, follow these steps:

  • Analyse your market research insights.
  • Identify potential gaps/opportunities.
  • Consider the needs of your customers.
  • Draft and test your USPs.

Use the name 'unique selling point' as a guide:

  • unique – highlight a meaningful difference
  • selling – deliver the message in a persuasive way
  • point – deliver a single-minded message.

Think about potential areas like:

  • products or services not currently offered by competitors
  • customer groups not currently catered for by competitors
  • aspects of your business that are different from competitors.

Your USPs should be true to your business—you must be able to deliver the promise.

Example USPs

Using the local sandwich shop as an example and looking at its CVPs, we can identify the main points of difference and write USPs to match:

  • Service: 'Every single sandwich made fresh with love.'
  • Choice of ingredients: 'Only the finest, chemical-free ingredients.'
  • Local: 'Our local farmers and growers say thanks.'

Meet your legal obligations

While competition may be fierce, it's important to still follow fair and legal practices. Every business must comply with the relevant laws while trying to find a position in the market.

The most important legislation to be aware of is the Competition and Consumer Act 2010 . It provides a fair and competitive operating environment and covers:

  • contract law and unfair contract terms
  • consumer rights when buying goods and services
  • product safety
  • unsolicited consumer agreements, including door-to-door and telephone sales
  • penalties, enforcement powers and the rights of consumers to seek compensation.

To understand your rights and responsibilities in the field of competition law, you can read:

  • Australian Consumer Law guidance – advice on how to comply with the Competition and Consumer Act 2010
  • Office of Fair Trading sales practice guidance – advice on making your sales practices are fair and legal.

Maintain your relevance

The only constant in business is change. That's why it's important to regularly review the trends that are shaping your market. These could include things like new:

  • technologies
  • competitors

You may need to evolve your business, but change also creates opportunities. This will require change management. Find out more about how to adapt and change your business .

The marketing field is always changing too. There's often an overemphasis on 'shiny new things.' It's good to stay up to date, but always:

  • refer to the fundamentals of marketing
  • adopt a strategic approach.

Your goal is to achieve your marketing objectives. To support this journey, make sure you refer to industry sources and external partners for:

Visit the Australian Marketing Institute to find information on best practice and standards.

Also consider...

  • Find help to write a marketing strategy and plan .
  • Learn more about branding your business .
  • Find information on how to become a customer-focused business .
  • Access tips and calculators to help you successfully price products and services .
  • Find out more about writing a business capability statement .
  • Watch our Price and profitability webinar for information and advice on how to price your products and services.
  • Last reviewed: 29 Aug 2022
  • Last updated: 8 May 2024

How to Write a Business Plan: Your Step-by-Step Guide

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So, you’ve got an idea and you want to start a business —great! Before you do anything else, like seek funding or build out a team, you'll need to know how to write a business plan. This plan will serve as the foundation of your company while also giving investors and future employees a clear idea of your purpose.

Below, Lauren Cobello, Founder and CEO of Leverage with Media PR , gives her best advice on how to make a business plan for your company.

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What is a business plan, and when do you need one?

According to Cobello, a business plan is a document that contains the mission of the business and a brief overview of it, as well as the objectives, strategies, and financial plans of the founder. A business plan comes into play very early on in the process of starting a company—more or less before you do anything else.

“You should start a company with a business plan in mind—especially if you plan to get funding for the company,” Cobello says. “You’re going to need it.”

Whether that funding comes from a loan, an investor, or crowdsourcing, a business plan is imperative to secure the capital, says the U.S. Small Business Administration . Anyone who’s considering giving you money is going to want to review your business plan before doing so. That means before you head into any meeting, make sure you have physical copies of your business plan to share.

Different types of business plans

The four main types of business plans are:

Startup Business Plans

Internal business plans, strategic business plans, one-page business plans.

Let's break down each one:

If you're wondering how to write a business plan for a startup, Cobello has advice for you. Startup business plans are the most common type, she says, and they are a critical tool for new business ventures that want funding. A startup is defined as a company that’s in its first stages of operations, founded by an entrepreneur who has a product or service idea.

Most startups begin with very little money, so they need a strong business plan to convince family, friends, banks, and/or venture capitalists to invest in the new company.

Internal business plans “are for internal use only,” says Cobello. This kind of document is not public-facing, only company-facing, and it contains an outline of the company’s business strategy, financial goals and budgets, and performance data.

Internal business plans aren’t used to secure funding, but rather to set goals and get everyone working there tracking towards them.

As the name implies, strategic business plans are geared more towards strategy and they include an assessment of the current business landscape, notes Jérôme Côté, a Business Advisor at BDC Advisory Services .

Unlike a traditional business plan, Cobello adds, strategic plans include a SWOT analysis (which stands for strengths, weaknesses, opportunities, and threats) and an in-depth action plan for the next six to 12 months. Strategic plans are action-based and take into account the state of the company and the industry in which it exists.

Although a typical business plan falls between 15 to 30 pages, some companies opt for the much shorter One-Page Business Plan. A one-page business plan is a simplified version of the larger business plan, and it focuses on the problem your product or service is solving, the solution (your product), and your business model (how you’ll make money).

A one-page plan is hyper-direct and easy to read, making it an effective tool for businesses of all sizes, at any stage.

How to create a business plan in 7 steps

Every business plan is different, and the steps you take to complete yours will depend on what type and format you choose. That said, if you need a place to start and appreciate a roadmap, here’s what Cobello recommends:

1. Conduct your research

Before writing your business plan, you’ll want to do a thorough investigation of what’s out there. Who will be the competitors for your product or service? Who is included in the target market? What industry trends are you capitalizing on, or rebuking? You want to figure out where you sit in the market and what your company’s value propositions are. What makes you different—and better?

2. Define your purpose for the business plan

The purpose of your business plan will determine which kind of plan you choose to create. Are you trying to drum up funding, or get the company employees focused on specific goals? (For the former, you’d want a startup business plan, while an internal plan would satisfy the latter.) Also, consider your audience. An investment firm that sees hundreds of potential business plans a day may prefer to see a one-pager upfront and, if they’re interested, a longer plan later.

3. Write your company description

Every business plan needs a company description—aka a summary of the company’s purpose, what they do/offer, and what makes it unique. Company descriptions should be clear and concise, avoiding the use of jargon, Cobello says. Ideally, descriptions should be a few paragraphs at most.

4. Explain and show how the company will make money

A business plan should be centered around the company’s goals, and it should clearly explain how the company will generate revenue. To do this, Cobello recommends using actual numbers and details, as opposed to just projections.

For instance, if the company is already making money, show how much and at what cost (e.g. what was the net profit). If it hasn’t generated revenue yet, outline the plan for how it will—including what the product/service will cost to produce and how much it will cost the consumer.

5. Outline your marketing strategy

How will you promote the business? Through what channels will you be promoting it? How are you going to reach and appeal to your target market? The more specific and thorough you can be with your plans here, the better, Cobello says.

6. Explain how you’ll spend your funding

What will you do with the money you raise? What are the first steps you plan to take? As a founder, you want to instill confidence in your investors and show them that the instant you receive their money, you’ll be taking smart actions that grow the company.

7. Include supporting documents

Creating a business plan is in some ways akin to building a legal case, but for your business. “You want to tell a story, and to be as thorough as possible, while keeping your plan succinct, clear, interesting, and visually appealing,” Cobello says. “Supporting documents could include financial projects, a competitive analysis of the market you’re entering into, and even any licenses, patents, or permits you’ve secured.”

A business plan is an individualized document—it’s ultimately up to you what information to include and what story you tell. But above all, Cobello says, your business plan should have a clear focus and goal in mind, because everything else will build off this cornerstone.

“Many people don’t realize how important business plans are for the health of their company,” she says. “Set aside time to make this a priority for your business, and make sure to keep it updated as you grow.”

how to write competitive advantage in business plan

More From Forbes

Ceo confidentiality: guarding business secrets for competitive edge.

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CEO, Atlas Surgical Group , one of the largest ASC groups in U.S. Author of "Success in Amb. Surgery Ctrs" and "The Healthcare Entrepreneur."

Khalil Gibran once wrote , "If you reveal your secrets to the wind, you should not blame the wind for revealing them to the trees." In the realm of business, the role of a CEO extends beyond leadership and strategic vision; it encompasses the critical responsibility of safeguarding confidential information.

This duty is paramount to maintaining a competitive edge in the market. The dissemination of sensitive information, whether intentional or accidental, can significantly undermine a company’s strategic positioning, operational success and market reputation. While I am no proponent of restrictive covenants, they were created with the good intent to protect such interests.

Below are key areas of confidentiality that a CEO diligently protects, illustrated with real-life examples and references.

1. Financial Performance

Maintaining the confidentiality of a company's financial performance is crucial, particularly in fluctuating markets where investor confidence is key. The business world is cut-throat, and the revelation of strengths, or weaknesses as the case might be, invites the proverbial vultures to attack you.

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Monday, july 1 . russia’s war on ukraine: news and information from ukraine, hurricane beryl strengthens to category 5 and moves towards jamaica after pummeling other caribbean islands—photos.

I think Elon Musk, CEO of Tesla, exemplifies this strategy. In Tesla's early stages, Musk meticulously managed the release of financial data to maintain investor confidence and secure necessary funding, even when the company was not yet profitable . His careful handling of financial disclosures helped stabilize and eventually propel Tesla's market presence.

2. Strategic Plans

Strategic plans are the blueprints for a company's future and must be closely guarded to prevent competitors from gaining an advantage. If everyone is aware of your strategy, you inadvertently empower them with the same roadmap, transforming your unique advantage into a common plan.

As an example, Jeff Bezos, former CEO of Amazon, kept the development of Amazon Prime under tight wraps until its launch. This secrecy allowed Amazon to revolutionize e-commerce with a groundbreaking subscription service, securing a substantial market lead before competitors could respond.

3. Business Partnerships

There's an African proverb that goes : "If you want to go fast, go alone. If you want to go far, go together." Business partnerships can significantly influence a company’s trajectory, making their confidentiality essential.

It is often more advantageous to be a small part of a larger, thriving enterprise than to hold a significant stake in a modest, limited venture. Being a small piece of a big pie means you are part of a more extensive and dynamic ecosystem that can often offer greater opportunities for growth, collaboration and influence. This position allows you to leverage the extensive resources, networks and innovations of a larger entity, which can exponentially enhance your impact and success.

And partnerships can be classified info as well in the business world, much like other business secrets. Tim Cook, CEO of Apple, is known for maintaining secrecy around Apple’s partnerships. This strategic confidentiality allowed Apple to manage its product transitions smoothly, minimizing market disruptions.

4. Marketing Strategies

Confidentiality in marketing strategies is essential for creating competitive and effective campaigns. By keeping plans under wraps, companies can prevent competitors from countering their moves and can build suspense and anticipation among consumers.

Steve Jobs, the cofounder of Apple, exemplified the power of secrecy in marketing. He was particularly adept at maintaining a shroud of mystery around product launches. This strategic concealment was crucial in generating public anticipation and media frenzy, which played a significant role in the success of Apple’s marketing campaigns.

For instance, the original iPhone’s launch details were kept under tight wraps until its official unveiling. This secrecy not only heightened public curiosity but also ensured that Apple had complete control over the narrative. When Jobs finally revealed the iPhone in January 2007 , the announcement was a watershed moment in technology history, setting the stage for the iPhone’s phenomenal success.

5. Product Development

Confidentiality in product development is a pivotal strategy for companies aiming to maintain a competitive edge. By keeping details of new initiatives under wraps, businesses can protect their innovations, surprise the market and strategically position themselves ahead of competitors. Mark Zuckerberg, CEO of Meta (formerly Facebook), has demonstrated the importance of this approach through several high-profile, confidential projects.

One notable example is Meta’s acquisition of Oculus VR in 2014. This purchase was not just a transaction but a strategic move to integrate virtual reality (VR) into Facebook’s ecosystem, significantly shaping the company’s long-term vision. The acquisition was managed with a high degree of secrecy, which was crucial for its success.

6. Business Model

As Benjamin Franklin once wrote , "Three can keep a secret, if two of them are dead." Innovations in business models are often the cornerstone of a company’s success and need to be protected until fully implemented.

The confidentiality of new business models prevents competitors from copying or countering these strategies prematurely. In a rapidly evolving market, the element of surprise can provide a substantial head start. For example, when a company develops a novel business model, such as a disruptive pricing strategy or a unique customer engagement approach, keeping these plans confidential ensures the firm can establish itself in the market without facing immediate competitive pressure.

Reed Hastings, CEO of Netflix, maintained the confidentiality of Netflix’s shift from DVD rentals to streaming. This well-guarded secret provided Netflix with a significant head start in the streaming market, establishing it as a dominant player before competitors could react, highlighting the importance of this business strategy.

In conclusion, a CEO’s responsibility to protect business secrets is vital for sustaining a competitive advantage. Confidential information spans financial performance, strategic plans, business partnerships, marketing strategies, product development, business models and employee information.

By keeping these aspects under wraps, a CEO ensures that the company can operate securely and strategically, navigating the competitive landscape with resilience and innovation. This careful stewardship of sensitive information not only fortifies a company’s current market position but also paves the way for future growth and success.

In the words of Virginia Woolf , "The eyes of others our prisons; their thoughts our cages." Be careful who gets to watch you.

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How to Write a Business Plan Conclusion?

  • Vinay Kevadia
  • June 20, 2024

business plane conclusion

Completed writing your business plan?

Let’s wrap it up with a conclusion that ends your business plan on an exciting and positive note. Not to forget—a conclusion that convinces the readers about your business’s potential to succeed.

In this blog post, you will learn exactly how to write a conclusion of a business plan and get an example to guide you.

Let’s get started.

What is a business plan conclusion?

A business plan conclusion is the final section concluding very concisely the points discussed in your business plan.

It reinforces the business’s strengths and feasibility and reassures the readers of potential business success. It clarifies the reader’s benefit of associating with your business and convinces them of a profitable investment opportunity.

A conclusion is about 3-4 paragraphs long and is designed to drive action and leave a lasting impression on reader’s minds.

Business plan conclusion vs. executive summary

Many people confuse a conclusion and an executive summary to be the same. However, they are not. Let’s see how.

  • An executive summary is a broad overview of your entire business plan. The conclusion, on the other hand, is a concise summary reinforcing the key takeaways of your plan.
  • While an executive summary introduces the readers to your business idea, a conclusion convinces them to take the desired action.
  • An executive summary is a preview of what the plan will be about. The conclusion, on the contrary, is a review of what the plan has discussed.
  • An executive summary is concise. However, conclusions are more concise covering only the aspects that can drive decisions and actions.

Clear enough, right? Let’s move ahead.

Why is a business plan conclusion important?

Although a conclusion is not mandatory, it is an important aspect of a business plan. It communicates your passion and commitment to a business idea and convinces the readers of your ability to succeed.

A conclusion synthesizes the key insights of your business plan focusing on aspects such as market analysis, business strategy, competitive advantage, and milestones. It reinforces your plan’s vision and establishes your strategic position amongst readers.

A well-crafted conclusion will drive desired actions from the readers. It can seal the deal and fulfill your objective of writing a business plan .

How to write a conclusion for your business plan?

From what information to include to where to place the conclusion—this section will guide you to write an impactful conclusion for your business plan.

1. Choose the right placement

There are two places for you to place your conclusion. It can either be after your executive summary or at the end of the document.

The location changes depending on who you plan to present your business plan with.

If you prepare a business plan for investors , placing your conclusion after the executive summary will increase the likelihood of it getting read.

However, the conclusion should be placed at the end for business plans that are prepared for internal use and business partners. Conclusion in this case reviews and emphasizes the company’s strengths.

2. Place the right information

The information in your conclusion changes depending on your audience and the intent of the business plan.

For instance, if you’re a new business trying to secure funds, your conclusion can synthesize the key details about the following:

  • Funding demands
  • Benefit to the investors
  • Target market and target customers
  • Solution for the problem
  • Marketing strategy
  • Team members and their expertise
  • Financial projections
  • Competitive advantage
  • Launch plan

However, if you’re a small business trying to grow or use this plan for internal use, consider covering key insights from the following aspects:

  • Mission statement
  • History and the milestones
  • Data supporting growth
  • Industry trends
  • Financial summary
  • Long-term goals and objectives

These are the details you can cover while writing your conclusion. However, including every bit of these in your conclusion is unnecessary.

Think from your reader’s perspective. Determine the information that would excite them about your business and form your conclusion accordingly.

3. Include stats and visuals

Now that you’ve decided on the placement and information to be included in your conclusion, it’s time to make your conclusion zesty.

How? Get the facts and stats that would support the claims you make in your conclusion.

For instance, if you’re promising growth, show market research that supports your claim. Again, if you’re promising a certain return on investment, include the statistics that can make investors believe you.

Sway away from vague statements and assumptions. And, if you feel that the statistic would be best absorbed through visual charts or graphics, don’t be afraid to add one.

4. Add a CTA

If you want the readers to take action, guide them. Add a crisp clear call to action(CTA) and explain how the readers would benefit from taking that action.

For instance, 

  • Join us as a silent partner by investing in Beanco.
  • Invest $2 M and secure a 20% stake in equity.
  • Support our growth by sharing references.

Don’t beat around the bush. If you are making a funding request, be unapologetic. And even if not, your CTA should suggest how a reader can support your growth.

5. Review and proofread

Once your conclusion is ready, re-read and proofread it for any grammatical or spelling errors. Fix the flow and remove fluff to make your conclusion crisp and persuasive.

Get your friends and business partners to read the conclusion and check if the message you are trying to send is crisp and clear. If not, make the necessary adjustments.

Business plan conclusion example

Use this business plan conclusion as a reference and tailor yours keeping in mind the needs, objectives, and audience for your business plan.

Launching EcoRide Electric Scooters will revolutionize urban transportation by providing an eco-friendly, efficient, and affordable solution for city commuters. Our innovative design and advanced technology will set us apart in the rapidly growing market for sustainable transport options.

We are poised to make a significant impact on urban mobility, and we want [Investor’s Name] to be a foundational part of our journey. By investing in EcoRide Electric Scooters, [Investor’s Name] will benefit in the following ways:

  • Joining a groundbreaking startup with a vision to reduce urban pollution and traffic congestion, led by a passionate team with over 20 years of combined experience in the automotive and tech industries.
  • Supporting the development and deployment of cutting-edge electric scooters, contributing to a cleaner, greener urban environment.
  • Gaining equity in a high-potential startup with a scalable business model and the potential for significant returns as we expand to new markets.

Together, we can transform urban transportation, reduce carbon footprints, and create a sustainable future for city dwellers. If you share our vision for a cleaner, more efficient urban commute, partner with us.

Let’s conclude your business plan

Now that you have understood the process and referred to an example, let’s conclude your business plan.

Identify the information you must highlight, encapsulate it into a powerful conclusion, and pair it with an even more powerful CTA.

However, remember that the conclusion just seals the deal. It’s the business plan that will hook your readers till the end. With Upmetrics’s AI business plan generator , you can create truly engaging business plans in just about 10 minutes.

So, improvise your business plan, sum it up with a convincing conclusion, and send over your business plan to your potential investors to secure funding.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

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Frequently Asked Questions

How long should a business plan conclusion be.

A conclusion of your business plan can be anywhere between 2-3 paragraphs long. In this ideal length, you must outline the key takeaways of your plan, clarify the next step to the readers, and explain to them the benefit of supporting your business.

What is the most important part of a business plan conclusion?

A CTA is the most important part of the conclusion, especially if you are trying to raise funds. However, if you are writing a plan for internal purposes, focus more on synthesizing the key essentials of a plan.

Can I include new information in the conclusion?

A conclusion does not introduce any new information. It simply reinforces the business’s position and convinces the readers to take the desired action for one last time. For instance, offer funding for your business.

Is it necessary to include a call to action in the conclusion?

It is very important to add a crisp clear CTA while concluding your plan. You can’t expect the readers to invest in your business or help you grow if you don’t clarify the steps to take action.

About the Author

how to write competitive advantage in business plan

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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  26. How to Write a Business Plan Conclusion?

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