Perform a Small Business Competitive Analysis
How To Perform a Competitive Analysis for Your Small Business
To become a successful small business owner, you must keep many things in mind. The quality of your goods and/or services, how to properly market those goods and/or services, the management of your employees, keeping up with the rapidly changing technological times, taxes, location, and of course keeping current customers happy and satisfied with your goods and/or services. However, it may also be advisable to keep tabs on your competition.
One of the best ways to ascertain where you, your small business, and your goods and/or services fit within your chosen market or industry is to perform a competitive analysis. As Thrive explains: “a competitive analysis offers small and middle market business owners more than [a simple] examination of their top competitors. This research takes a deep dive into the strengths, weaknesses, and marketing strategies of [your] business’s top competitors.”
While completing a competitive analysis may take time out of your busy schedule, it is an important tool in the discovery of your small business’s marketing leverage. Marketing leverage is a vital item to be aware of – something your small business can provide, which your competitors can (or will) not. An example of marketing leverage could of course mean the goods and/or services your small business provides – but it can also refer to the way you choose to market or advertise said goods and/or services. These are the advantages you will have once you learn how to perform a competitive analysis for your small business.
Once you are aware of your small business’s particular flavor of marketing leverage, you can take advantage of that marketing leverage. It may allow you to target your demographics more effectively – and may even help to widen your marketing leverage even more. Additionally, it has the added benefit of demonstrating to current and prospective investors that you understand your industry and can implement a sound marketing strategy based on the information your competitive analysis provided.
Let’s get started with best practices to incorporate into your small business’s competitive analysis. The first thing to establish is a schedule for performing competitive analyses. How often should you conduct them? Many small businesses conduct them once a year – so they can integrate the information these analyses provide into their annual marketing strategy.
Other appropriate times for performing competitive analyses include the stage before establishing your small business or before launching a new product and/or service line. It is also advisable to conduct these sorts of analyses when major changes occur in your industry or marketing environment.
The second step to take while performing a competitive analysis for your small business is to identify your competitors. (This goes without saying, of course.) You may already know most of your competitors, but it may be helpful to broaden your radar and find three to five locally based competitors providing similar goods and/or services to your small business. Limiting the maximum number of competitors to keep tabs on to five is essential if you wish to ensure your competitive analysis is as comprehensive as possible.
Assessing the Size of Your Competitors
A quick and easy way to determine the revenue size of your competitors is to do a head count analysis. First, take your total revenue for last year and divide it by the number of employees you have. This gives you the average revenue per employee. Next, acting as a customer, call your competitors and ask them about their goods and services. Also ask them how many employees their company has. Most businesses will provide this information. Multiply their number of employees by the per-revenue employee number you calculated for your business. Assuming they are in the same local economy and industry as your business, this can give you a fairly good estimate of their total annual revenue.
Products and Services Matrix
Once you’ve conducted these stealth customer calls to your competitors, it’s easy to create a simple matrix to compare your small business’s goods and/or services to your competitors’ goods and/or services. How do they stack up? What are the bigger businesses offering that you don’t? What are your small business’s goods and/or services strengths and weaknesses? Ask the same question when studying your competitors’ offerings. It is always important at this stage to be honest with yourself. Otherwise, the information you gather will be meaningless.
After answering these sorts of questions, you will be able to see clearly what your small business’s goods and/or services bring to the table and what your competitors’ goods and/or services bring as well. What does your small business provide, which other small businesses are unable or unwilling to provide? What about the other way around – which sorts of items do they provide, which you do not? Is there any way you can? Is there any way you can provide an improved product/service/experience which will compare favorably with your competitors?
Of course, it’s not all about your small business’s goods and/or services either. It could be facets of you and your competitor’s marketing strategies. Are they selling a similar good and/or service in a more effective way than you are? Is there any way you can possibly rectify this situation? Is there any way you can market your goods and/or services more effectively to your target customers? Have you by any chance missed a demographic your competitors are focusing on? Are there forms of social media your competitors are using effectively that you aren’t? (In order to discover information like this you may have to subscribe and follow your competitors on these various social media platforms – to establish and monitor the lay of the land.)
Answering these sorts of questions and others like them will allow you to establish your small business’s market position. If you are clear about where your small business lies within the marketplace you will be far more equipped when it comes to developing a marketing plan. You will be able to see more clearly the gaps in the market and possibly even untapped potential demographics.
This way, your small business can grow more rapidly and effectively. When all these questions can be clearly and carefully answered – you will see why this practice was such a beneficial decision for the continued (and exponential) flourishing of your small business. Now you know how to perform a competitive analysis for your business, use this knowledge to gain an advantage!