At Vancity, we see hundreds of business plans each year from new and aspiring entrepreneurs. And from that experience, we know there are five areas in the business plan that entrepreneurs may not spend enough time on: business objective, SWOT analysis, cash flow projection, competitive advantage and market potential.
In this series, I’m going to share some tips on each of these five areas to get your business plan in top shape. In this post, I’ll cover ways to identify your competitive advantage.
What makes your business special? What are you doing differently than your competitors? Why should customers choose your product or service? These are the questions you should ask yourself when determining your competitive advantage. It’s something that often gets overlooked in many business plans, but understanding your competitive advantage is a huge factor in starting and running a successful business.
These three steps will help you realize what sets you apart from the rest:
1. Identify your competitors
Start by making a list of your direct and indirect competitors. Not sure who they are? Direct competitors are businesses that satisfy a similar need that you fulfill. Try Google searches and check online business listings in your area. If you are planning on setting up a physical location, walk the community around where your business will be. Even if there don’t appear to be other businesses directly competing with you, there are always other businesses competing for your customer’s time and money. Ask yourself who they are and what products or services are they selling?
2. Find their strengths and weaknesses
Identify what your competitors are doing right. Do a little research to determine what hooks people on their product or service. Next, identify what they’re doing wrong. What’s keeping people from shopping with them? What turns customers off? Make time in your calendar to observe and take notes, or go online and check out website, product and service reviews and see what past customers have had to say.
3. Figure out your “special ingredient”
Lastly, use the information you learned about your competitors to determine your own “special ingredient.” What makes your business stand out? Think about how your values align with your audience, your branding, story, and who you are as a business owner. Consider your customer service, the quality of your products, and where you source your materials from. You may have one very obvious special ingredient, or you may find you have a few special ingredients.
In essence, your competitive advantage is a compelling argument for why a customer should buy your product or service over someone else’s. It’s a vital part of your business plan that helps a financial institution, and your future customers, decide to invest in YOU.
Looking for more support?
Looking for more support to help you complete your business plan? Find out when our next Each One, Grow One small business workshop is happening. The workshop is offered free for members and non-members, and are a great starting place to create your perfect business plan.