The competitive analysis is one of the shortest sections of a business plan and one of the most read. A lender uses it to judge whether your sales forecast is believable; an investor uses it to judge whether you understand the market you are entering. This guide walks through writing it, step by step, from an empty page to one or two finished pages. If you would rather start from a finished section, see the business plan competitive analysis example.
Where it goes and how long it should be
Most business plan formats, including the outline the U.S. Small Business Administration publishes, put competition inside the market analysis, after the description of your target customer and before your marketing and sales plan. That order matters: you describe the customer, then who already serves them, then how you will win them.
One to two pages is enough for most plans. A rule of thumb: if the section is longer than your description of the customer, it has turned into a list of companies rather than an argument.
Before you write: collect the facts
A competitive analysis is only as strong as the facts in it, so gather them first and date them. For each competitor you will need:
- What they sell and to whom, in their own words, from their website.
- What it costs: list prices, plans and any setup fees.
- How customers rate them, and the complaints that come up repeatedly in reviews.
- How they reach customers: location, online search, ads, partners, word of mouth.
If a competitor hides its prices, the guide on how to find competitor pricing covers the usual ways round it.
Step 1: Choose three to five direct competitors
Direct competitors sell a similar product to the same customer. Pick the three to five a customer is most likely to compare you with, and always include the one a reviewer would name first. Leaving out the obvious market leader is the fastest way to lose credibility. Not sure who counts? The difference is explained in direct vs indirect competitors.
Step 2: Compare them on the same facts, in a table
A table does more work than paragraphs, because it forces you to compare every competitor on the same things. Choose four to six rows that matter to your customer, and put your own business in the last column.
| Competitor A | Competitor B | Competitor C | Your business | |
|---|---|---|---|---|
| Who it is for | ||||
| Price (comparable offer) | ||||
| Key strength | ||||
| Most common complaint | n/a | |||
| How customers find them | ||||
| Rating (source, date) | New |
Fill it from your research, not from memory, and note where each fact came from in a footnote or appendix. For more layouts (feature matrices, positioning maps, scorecards), see these competitive comparison examples.
Step 3: Name the alternatives customers use instead
Your real competition is often not another company. It is the spreadsheet, the do-it-yourself option, the general-purpose tool or simply doing nothing. Write two or three sentences on what customers do today without you, and what it costs them in money or time. This is also where indirect competitors belong: businesses that solve the same problem a different way.
Step 4: State your competitive advantage, with evidence
This is the paragraph the reader is looking for. A strong advantage names a customer, a competitor gap and the proof:
For [customer] who [need], we offer [advantage], unlike [named competitor], which [specific gap]. We know this matters because [evidence: reviews, interviews, pre-orders, search demand].
“Better service” or “higher quality” is not an advantage until you can show it. The guide to competitive advantage examples has strong and weak versions side by side.
Step 5: Address the risks honestly
Finish with how competitors might respond (a price cut, copying your feature, a bigger marketing budget) and what you would do. Reviewers trust a plan that admits competitor strengths far more than one that calls every rival weak. A competitor SWOT analysis is a quick way to find these risks before the reader does.
A fill-in template for the whole section
Copy this outline and replace the brackets:
- Market overview (2–3 sentences): [Who buys], [how they buy today], [what they pay or how often].
- Direct competitors: “Customers in [area or segment] currently choose between [A], [B] and [C].” Then the comparison table.
- Alternatives: “Many customers instead [do it themselves / use X], which costs them [time or money].”
- Competitive advantage: the statement from step 4, with its evidence.
- Risks and response: “If [competitor] responds by [action], we will [response].”
For a competitor analysis business plan sample with every part filled in, see the worked example.
Final checklist before you submit
- The best-known competitor in your market is in the table.
- Every competitor is compared on the same rows.
- Prices and ratings have a source and a date.
- The advantage names a specific customer and a specific competitor gap.
- At least one competitor strength is acknowledged.
- The section supports, rather than contradicts, your sales forecast.