As an entrepreneur, it is vital that you create a business plan. A good business plan helps you identify the strengths and weaknesses of your business so you can focus on the strengths and fix the problems that contribute to the weaknesses. It can help you outline your financial needs by showing you where money is needed and how long it takes before profits are expected. And when you need more capital, a business plan is what investors, or lenders want to see.
Size Up the Competition
A business plan helps you evaluate the market for your product or service, and size up your competition. First of all, never assume that you have no competitors. You must never think that your business is so unique that you are the only one in the market. There are always people out there doing something similar to yours, or you may be competing with others who are not in the same business as you.
Direct and Indirect Competition
Every business has direct and indirect competition. Direct competition comes from companies that offer the same products or services to the same customer base. Indirect competition comes from companies that offer slightly different products or services with the goal of satisfying the same need. Both direct and indirect competition can take business away from you, that is why you must account for these types of competition in your business plan.
In order to be considered your direct competition, a company must be engaged in a business that is in the same business as you are. If you are in the burger business, you are in direct competition with other burger joints. If you are in the pizza business, your direct competition comes from other pizza brands. The direct competitors of a car dealer are the other car dealers in the area.
The indirect competitors of a burger business are the products which provide the same solution to a need. Just as a burger satisfies hunger, pizza, or a foot-long sandwich can also satisfy hunger. A burger chain and a pizza parlor are indirect competitors but both businesses also face indirect competition from other businesses which satisfy hunger such as hotdog stands, food trucks, and restaurants.
As an entrepreneur, you must have a clear understanding of your competition in order to succeed in your business. Knowing your competitors and knowing what they offer can help you improve your products to make them stand out.
Size Up the Competition
Analyze the competition, and when you find that your competitors are doing something better than you, you need to be ready to make changes. It might be in the area of customer service, your prices, or your marketing strategies. Perhaps by studying your competitors, you discover a gap in the market that you may be able to exploit. You may be able to target the right customers, and increase your market share in the industry.