How to Write a Competitive Analysis for a Business Plan

Why Competitive Analysis Matters

Investors and lenders immediately skip to your competitive analysis section. Why? Because "we have no competitors" is the #1 red flag that you haven't done your homework. Every problem has existing solutions—even if they're manual workarounds or indirect substitutes.

A strong competitive analysis does three things: (1) Proves you understand the market, (2) Shows where you fit in the competitive landscape, and (3) Demonstrates sustainable advantages that make your business defensible over time.

The goal isn't to say your competitors are terrible—it's to show you've identified a specific market gap where you have unique advantages. Think of it as strategic positioning, not a takedown.

Step 1: Identify Your Competitors

Direct Competitors

These companies solve the same problem for the same customers with similar solutions. If you're building project management software for marketing teams, Asana, Monday.com, and ClickUp are direct competitors. List 3-5 max.

Indirect Competitors (Substitutes)

These solve the same problem differently. For project management, this includes spreadsheets, email threads, Slack channels, or even pen-and-paper to-do lists. Don't ignore these—they often represent your biggest threat because they're free or already familiar.

Potential Future Competitors

Think about adjacent players who could enter your market. If you're a local coffee shop, Starbucks might not be a direct competitor today, but if they open next door in 2 years, game over. Mention 1-2 if relevant.

Step 2: Build a Competitive Matrix

A competitive matrix is a table comparing you against 3-5 competitors across 6-10 key factors. Here's what to include:

• Price: Low, Medium, High, Freemium, Custom
• Target customer: SMBs, Enterprise, Individual, Students
• Key features: List 5-7 must-have features and check who offers them
• Distribution: Direct sales, Self-serve, Resellers, Marketplace
• Customer support: Email only, Chat, Phone, Dedicated account manager
• Strengths/Weaknesses: What they're known for (good and bad)

Feature           | You   | Competitor A | Competitor B
---------------------------------------------------------------
Price             | $49/mo | $99/mo       | Free + Ads
Target Customer   | SMBs   | Enterprise   | Individuals
Mobile App        | ✓      | ✓            | ✗
Integrations      | 50+    | 200+         | 5
Customer Support  | Chat   | Phone        | Email Only
Ease of Use       | ★★★★★  | ★★★          | ★★★★★

Step 3: Analyze Competitive Advantages

After mapping the landscape, explain your sustainable competitive advantages. These fall into a few categories:

• Cost advantage: You can deliver the same value cheaper (economies of scale, better supply chain, automation)
• Differentiation: You offer something competitors can't easily copy (proprietary technology, exclusive partnerships, unique positioning)
• Focus: You specialize in a narrow niche where generalists can't compete (deep domain expertise, tailored features)
• Network effects: Your product gets better as more people use it (marketplaces, social platforms, data-driven AI)
• Speed: You can execute faster (smaller team, less bureaucracy, closer to customers)

Step 4: Use Porter's Five Forces (Optional but Impressive)

For investor-facing business plans, include a Porter's Five Forces analysis to show strategic thinking:

• Threat of new entrants: How easy is it for new competitors to enter your market? (Barriers to entry: capital, regulation, network effects)
• Bargaining power of suppliers: How much leverage do your suppliers have? (Number of suppliers, switching costs)
• Bargaining power of buyers: How price-sensitive are customers? (Switching costs, differentiation)
• Threat of substitutes: What alternatives exist? (How easy is it for customers to use something else?)
• Industry rivalry: How intense is competition? (Number of competitors, market growth rate)

Step 5: Create a Positioning Map

A positioning map is a 2x2 grid that plots competitors on two key dimensions. This visual instantly shows where gaps exist in the market.

Example for coffee shops: X-axis = Price (Low to High), Y-axis = Speed (Fast to Slow). Starbucks = High price, Fast. Local cafe = High price, Slow. Dunkin' = Low price, Fast. Your opportunity? Low price + Slow (high-quality third-wave coffee at affordable prices).

Choose dimensions that matter to your customers and highlight your unique position.

Step 6: Write the Narrative

After completing your research, write 2-3 pages that tell the story:

• Market overview: "The project management software market is crowded with 50+ established players..."
• Competitor profiles: 2-3 sentences on each major competitor (who they target, their strengths/weaknesses)
• Competitive matrix: Include the table with your analysis
• Your advantages: Explain 2-3 sustainable competitive advantages
• Barriers to entry: How you'll stay ahead once you've gained traction

Get Started Today

A well-researched competitive analysis separates serious founders from dreamers. Invest the time to understand your competitive landscape—it will inform your entire strategy, from pricing to marketing to product roadmap.