Every dollar a customer spends is a choice made between you and your competitors. That's why your competitors' weaknesses can translate into opportunities for your business. Likewise, their strengths can be challenges your business will have to defend itself against.

If you're starting up or running an established business, understanding your competitors can help you spot the most under-served customers and your
greatest opportunities for success. If you're winding down, indentifying competitors may help you find potential buyers for your business.

Competitive Environment

If you're unsure about whom your business competes with, start by scanning the yellow pages and searching online. Read trade magazines and local magazines to learn more about competitors who may enter your market in the future. For instance, if you run the only electronics retailer in your area, it's important to consider the possibility of a discount superstore moving into your area.

Provide an analysis of your competition by:

Listing Your Main Competitors
If you compete with many businesses, consider breaking your competition into categories based on what they offer, and present your main competitors in each category. For instance, a tire retailer might compete with other tire stores, auto dealers, independent mechanics, and large hardware chains.

It can also be helpful to rank your competitors in terms of "market share", from those you think do the most business, to those you think do the least. Or group them as large, mid-sized and small competitors. This type of information may be available from a trade assocation or market research firm. This can help you understand how your competitors share the marketplace, and where you might be able to carve out a piece for yourself.

Describing Your Competitors' Strengths and Weaknesses
Consider factors including price, customer service, location, reputation, and the range of services or products they offer. Based on the strengths and weaknesses you've identified, outline key opportunities and challenges for your business. Consider the following questions:

• Which of your competitors' weaknesses can you improve upon?
• How might your competitors use their strength to try to surpass you in the marketplace, and how can you protect your business against them?

Beware the temptation to suggest your company has no competition. Even if you're introducing something completely new to the market, your potential customers are currently satisfying their need in some other way.