You have a new idea for a company and are in the process of getting it underway. Before you launch your business, though, one of the most important things you can do is conduct a competitive analysis. A competitive analysis lets you see what companies that might similar to yours are doing and how successful they’ve been. While you might be absolutely certain that your new product or service is entirely new and unique, it could be the case that someone out there is already doing or offering what you plan to. With a competitive analysis, you get a clear picture of the landscape and can make appropriate decisions about how to proceed.
It Tells You What the Competition Is Doing
Whether you conduct a competitive analysis on a single company or several, performing them gives you an accurate idea of what others are doing. It not only shows you what the competition is offering to the world, but it also shows you how they are offering it and what tactics they have used to get their products or services out there.
For example, it could be that Company A launched a new product using a multi-million dollar advertising campaign. When you conduct a competitive analysis, you can evaluate the results of the company’s campaign. Was it effective and more importantly, would your company benefit from something similar?
A competitive analysis also lets you examine other company’s products up close. You can review feedback from customers, such as reviews or comments posted online, to get an idea of what the product does well and to see where it falls flat.
It Helps You Differentiate Your Company
Armed with the information you gathered in the competitive analysis, you can find ways to make your new business stand out. Perhaps Company A produces and sells a product similar to what you’re going to sell. Now that you see what their product does, you can add features to yours that make it better or different. You can use the feedback provided by Company A’s customers to enhance your product. Alternatively, you can look at what Company A’s product doesn’t solve and make sure yours does. That can mean your product has a longer battery life, weighs less, or costs less.
What you sell or offer doesn’t have to be entirely unique. There are lots of companies that produce shoes or that sell software. But you do need to find what makes your product or service different from the others and find ways to promote that difference so that it’s a selling point.
It Can Increase Your Appeal With Investors
If you’re trying to get investors interested in your new company, it helps to show them what makes you different and how your company can fill a need or void in the market. Performing a competitive analysis also sends investors the message that you’ve done your research and have a decent understanding of what the market needs and what’s available.
It’s fairly likely that a potential investor will ask you about the competition and will expect you to have a strong response to that question. While they might ultimately decide that your product or company isn’t worth investing in, going into a meeting prepared helps you get off on a strong footing.
It Can Show You What Not to Do
When you conduct a competitive analysis, you get to see the mistakes of your competitors up close. It can be a chance to learn from others and to decide what not to do with your new business. For example, a business might have grown too fast or might have abandoned its core customer base, leading to a drop in sales. When you see what didn’t work for other companies, you can make plans and decisions for your new business based on that information.
If you’re in the planning stages of your company and are considering performing a competitive analysis, the virtual CFOs at New Direction Capital are here to help. We can help you decide what to analyze and work with you to use the information you’ve gathered to develop a strong strategy that will help you launch a business that’s primed for growth.