Growthink Explains Why Showing Competitors is Good In Developing Your Business Plan
Shows that competitors justify that the market size is substantial.
(PRWEB) March 26, 2005 -- According to Growthink, when developing the competition section of your business plan, companies must define competition correctly, select the appropriate competitors to analyze, and explain its competitive advantages.
To start, companies must align their definition of competition with investors. Investors define competition as any service or product that a customer can use to fulfill the same need(s) as the company fulfills. This includes firms that offer similar products, substitute products and other customer options (such as performing the service or building the product themselves). Under this broad definition, any business plan that claims there are no competitors greatly undermines the credibility of the management team.
In identifying competitors, companies often find themselves in a difficult position. On one hand, they want to show that they are unique (even under the investors broad definition) and list no or few competitors. However, this has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough customer need to support the companys products and/or services.
According to Growthink, business plans must detail direct and, when applicable, indirect competitors. Direct competitors are those that serve the same target market with similar products and services. Indirect competitors are those that serve the same target market with different products and services, or a different target market with similar products and services.
After identifying competitors, the business plan must describe them. In doing so, the plan must also objectively analyze each competitors strengths and weaknesses and the key drivers of competitive differentiation in the marketplace.
Perhaps most importantly, the competition section must describe the companys competitive advantages over the other firms, and ideally how the companys business model creates barriers to entry. Barriers to entry" are reasons why customers will not leave once acquired.
About Growthink
Since its inception, Growthink has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share. Growthink has become the firm of choice for venture capital firms, angel investors, corporations and entrepreneurs in the know. For more information please visit http://www.growthink.com
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