One of the most important sections of your business plan is your Competitive Analysis. In this section, you’ll discuss your competition and evaluate their strengths and weaknesses. Most importantly, this is where you’ll explain how you plan to outperform your rivals.
A lot of entrepreneurs make the mistake of thinking that they have no competition; they assume that their product or service is so unique that they will have their target market entirely to themselves. There is always competition; and as investors define the term, competition is any product or service that satisfies the same need on the part of consumers (including actions that they can take on their own).
A company which says there is no competition looks naive; and even if there was no competition in a given niche market, this would show potential investors that there is little to no revenue to be made by targeting this market. A company which makes this claim won’t receive funding, plain and simple. By the same token, a company which has too many competitors or very strong and well established competitors may not be able to gain enough market share to be viable and again, this means no funding.
This is what is called the competition dilemma and the best way to answer this is in your Customer Analysis. Provide demographic data and profiles of your target market in as much detail as possible what you want to do here is establish that there is an unmet need in this market which your company is uniquely positioned to meet.
Your Customer Analysis should include data on the number of consumers who have purchased similar products and services, projections of how many consumers would be interested in buying the kind of product or service you offer and of course, what these figures mean for your business. This is the way to solve the competition dilemma and answers this particular trick question.
Show investors in your Customer Analysis that you understand your market. You can go on to support this argument by demonstrating your knowledge of your competition and your plan to do better than your competition at meeting the needs of your target demographic in your Competitive Analysis.