Competition
There might be a planet somewhere in the universe where companies have no competition, but this planet isn't one of them. Many entrepreneurs make a critical mistake in their business plans - they claim they have no competitors. A plan stating that no competition exists, quickly loses credibility with bankers, investors, and experienced business people. Don't make this mistake yourself. Unless you're a government entity, public utility, or communist country - you have competition. And even these monstrous organizations are realizing that competition exists for everyone.

But competition isn't necessarily bad. Coke has Pepsi. Nike has Reebok. Wal-Mart has K-Mart. And the list goes on. The value of competition is that it forces you to analyze who you're up against and what it takes to achieve success in your industry, market, and business. Competitors actually help you clarify your selling position and determine how to best distinguish yourself from the crowd.

Nike makes billions and so does Reebok. But, everyday they wake up with the desire to compete against each other and win. At one point in time, Nike even adopted the mission statement, "Crush Reebok". Signifying how a competitive rivalry can drive companies to greater heights.

Investors will read your business plan and expect to see your competitors identified - don't disappoint them. Keep in mind that most investors ARE investors because they successfully dealt with business competition in the past. With that in mind, never even imply the following ideas in the competition section of your plan: "XYZ Corp has no competition", "XYZ Corp's product is so superior that we have no competitors", or "XYZ Corp's service is so different and unique that we have no competition". Your reader will disagree, wonder why you can't see that you operate in a competitive environment, and assume you're a business dunce. This is clearly not the goal of your business plan.

Instead, your business plan should honestly and intelligently outline how your business fits into the big picture of your area, market, and industry. If you do this concisely but thoroughly, and pinpoint factors that separate you from your competition, it will go a long way in the eyes of the investors reading your plan.

So exactly how do you identify your competitors? Sometimes it's easy to determine and sometimes it is not. If you intend to open a donut shop, then all the other donut shops within perhaps a 10 mile radius would be considered competition. But what about supermarkets that serve donuts? And what about bakeries that sell donuts and other baked goods? These are pretty obvious, and most people would consider them when starting a company and writing a business plan.

But what about Bagel shops? They don't serve donuts, but they still compete for the same breakfast dollar. And what about the coffee shops and the Starbucks of the world? Your potential customers might decide to spend their money on a morning cup of coffee instead of a donut from your shop.

Consider including these topics in the competition section of your plan:

Competitor Profile
This section should outline the basic characteristics of your competition. Discuss the key features of competitors' products or services such as: purchase price, peripheral costs, quality, durability, and maintenance needs. What is the perceived value of their product? Is the image or name brand a factor? Where are they located? What are their credit policies and delivery terms? How does their customer service stack up?

Also consider the financial strength, marketing savvy, and technological advantages of your competitors. How solid is their access to suppliers, wholesalers, distributors and retailers? Do they have any strategic partnerships or patents, which could cause problems for your company? Do they have economies of scale in place that make it difficult for your company and others to compete.

Market Share
In this section, provide a breakdown of your competitors by percentage of market. If possible, try to analyze and present this information from both a revenue and units sold perspective. This gives you insight into your market, who the big players are, and where you can fit in and begin to take market share from. Consider preparing a five year analysis showing how market share has changed and shifted over time.

Your company's ability to focus on a market niche can help you gain market share. Pick a niche and make it yours. It can establish your products and reputation, and will help you gain loyal customers and market share as your company grows.

Comparison of Strengths and Weaknesses
Clearly present and compare your strengths with that of your competitors in this section. Don't forget to present your weaknesses. Every company has them. Be honest and logical about the comparisons you make. Consider product superiority, price advantages, market advantages, management strengths and weaknesses, and more.

Barriers to Entry
Think about the factors that make it difficult for you to enter and compete against established companies - these are called barriers to entry. The following list of barriers should be addressed in your business plan, considering both the positive and negative issues related to your business and your industry.

• Patents/Proprietary product differences
• High-start-up costs/Capital requirements
• Substantial expertise required
• Manufacturing or engineering difficulties
• Market saturation – no room within market for new competitors
• Economies of Scale
• Brand Identity
• Access to distribution
• Government policy

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