- Understanding the importance of analysing your competitors will help you create a great business plan.
- The importance of choosing the right location: are there many competitors in your area? Is it overserviced or untapped?
- Here's a short action plan of three points for the better development of your business.
Developing an effective business plan is one of the most important things you can do if you are truly serious about starting a new business. I have had business side projects before and for those, I didn’t put much effort into a business plan, but they were more hobbies, rather than a serious change in career.
In January 2018 we officially opened our new non-surgical and advanced dermal therapy clinic Youth Lab, but not before a rigorous 12 months of developing the idea and 6 months of those developing a detailed business plan. For this venture, we were leaving our jobs, purchasing equipment, taking on a lease and borrowing significant money. We owed it to ourselves to plan vigorously and ensure we had all our bases covered.
To get started on a business plan, here are a few useful resources that get you going and help you in the formatting and what needs to be included. If you are not great with maths, then go to an accountant or bookkeeper to help you with these bits of the plan. Sure it costs a little but at least you know the figures add up and that is very important if you need to approach a bank.
My focus below is going to be on the importance of analysing your competition during the business plan process, how to approach it and what methods you can use to get valuable insights of it.
Unless you are truly ahead of the curve and developing a business that is of true innovation, you are going to have competitors existing in the market in one form or another. Some markets are already saturated, say if you were opening a restaurant in a vibrant city centre.
Now that is not to say it cannot be a success, but you really need to be sure you are offering something others are not offering. Essentially you need to be able to articulate why customers should go to you over existing restaurants. Think intangibles such as having a world-class chef, having a type of food no one offers or a theme that is groundbreaking.
A key reason why you want to look at the competition is to see if they are falling short in any areas and to see if you can identify some points to offer something new. As I say, not everyone will start the next Google, but small innovations to existing markets can be a profitable venture.
By looking at the competition you can see if a particular location is being overserviced and rather than opening in that location, you could carve out a new area that is untapped. I live by a beautiful park in Perth WA and there are no shops around it, but a few years ago a new baker popped up nearby on the corner right across the street from this lovely park.
Typically you’d expect a bakery to be on the high street with passing trade, but these guys saw something no one else did. The bakery is flat out every day. Due to the superb weather Perth has, it is now the go-to place for couples, dog walkers and mums with their strollers throughout the week to get a great coffee and great pastries, then they take a stroll around the park or sit down on a bench.
They had an innovation in a saturated market and it paid off big time as the park became their seating area at no cost. It wasn’t luck. It was a calculated move.
In your mind, you’ll have a good idea of some key competitors you have, and I advise you to start making a list of these, narrowing it down to your essential competition i.e. the ones going for the same target market as you (high end vs bargain hunters etc).
If you’re providing a manual service, think of the areas your competitors are covering and where you propose to cover. Are there overlaps or are there some areas with no one providing service coverage? Why? Because it is a gap in the market or because there is no market.
If you’re a restaurant, think about proximity to other rivals. If you’re a retailer, think about whether you need footfall or whether you can be a destination location so people specifically come to visit you (this is what we are). All these questions should be asked before you start borrowing money as they can save you a fortune and help you identify opportunities. These questions allow you to think more critically and give you a higher chance for success.
When we set up Youth Lab, I pulled up Google Maps and looked for cosmetic clinics in potential areas we were considering. I saw several suburbs were a bit saturated in cosmetic clinics, so we ended up picking a location adjacent to an already popular area, just off the main road (lower rental costs) and near a wealth of professional office buildings. As such we get a good amount of business from professionals (more disposable income) who work nearby.
I also noted that a big number of our key competitors didn’t offer parking as the costs of the bays to businesses in our area is very high. I knew this would be a draw card for our clinic as people today love the convenience and there is nothing more stressful than being late for an appointment and not being able to park. These are both subtle examples of tangible results from analysing the competition.
Hopefully, by this point you can see the benefits of analysing your competitors and below I am going to outline a short action plan:
- Write down a list of your competitors, try to limit it to the top 10 focused on your specific market and service location.
- Conduct a SWOT Analysis of your own business which is a simple way to analyse the Strengths, Weaknesses, Opportunities, Threats. By going through this process you start to see where you might have some really good strengths working in your favour or identify some threats that you may not have considered. Better to know these 6 months before you borrow money, than 6 months into trading.
- Use a Competitive Matrix to really dive into seeing how your business concept stacks up against the competition. Be impartial and don’t be biased. The more critical you can be of your business at this stage the more likely you are to ask the tough questions and avoid start-up issues.