A well-prepared Competitor Analysis is a key to attracting potential buyers

You need to conduct a regular competitor analysis to understand your competitors' strengths and weaknesses, as well as to identify market gaps. A competitor analysis can assist you in improving your product or service, serving your target audience better, increasing your profits, and if you decide to sell your company, you can also present the same to potential business buyers for a better understanding of your market position.

Learn what a competitor analysis is, why conducting one regularly can help you in your exit strategy, and the process for conducting one.

What exactly is a competitor analysis?

Competitor analysis is the process of identifying and evaluating businesses in your market that provide similar products or services to yours based on a set of predetermined business criteria. A thorough competitor analysis will enable you to see your company and competitors through the eyes of your customers, allowing you to identify areas for improvement.

According to David M.M. Taffet, CEO of Petal, "A competitor analysis focuses on identifying market participants positioned to encroach on your opportunity and isolates each participant's operational strengths, substantive weaknesses, product offerings, market dominance, and missed opportunities."

The key takeaway is that competitor analysis is an in-depth examination of your competition's strengths and weaknesses to see how your company compares.


Why is a competitor analysis necessary?

To stay current with market trends and product offerings, it is critical to conduct routine competitor analysis throughout the lifecycle of your business. A competitor analysis can reveal important information about market saturation, business opportunities, and best practices in the industry and are key elements considered by potential company buyers at the time you want to sell your business.

It is also critical to understand how your customers perceive you in comparison to your competitors. A competitor analysis will help you understand what services are currently available to your target customer and which areas are being overlooked.

Both offence and defence benefits are gained from competitor analysis. When you compare your company to the competition, you can see where you can improve as well as where you excel. It may even assist you in identifying a new niche that you can capitalize on.

The key takeaway is that a competitor analysis teaches you critical information about your market, allowing you to make well-informed business decisions, including business valuations.

What are the advantages of performing a competitor analysis?

Analysing your company against its competitors can be beneficial in a variety of ways. It will, for example, reveal which aspects of your business, product, or service require improvement. When you decide to sell your business, this knowledge can aid the prospective buyer to understand, how to improve your processes and increase your profit by better serving your target market. It can also reveal new strategic opportunities for improving your products or services and expanding your business post the buyout.

After conducting a competitor analysis, you can use the results to benchmark and measure future growth. Routine analyses will reveal market trends to monitor and new players to be on the lookout for. It will also help you identify who your current competitors are at each stage of your business. 

"Too many businesses conduct competitor analysis early on and then disregard it once their brand is established. Industries are always changing, and every time a new company enters your space, they conduct a competitor analysis on you. It is critical to evaluate your competitors on a regular basis," says Colin Schacherbauer, lead content marketer at Investor Deal Room

Takeaway: A competitor analysis can help you improve your business, meet the needs of your customers, and increase your profit. This is exactly what a buyer scopes for to determine if the business opportunity has potential.

What should a competitor analysis include?

A general SWOT (strengths, weaknesses, opportunities and threats) and PEST (political, economic, social and technological) analysis is a good place to start, but there are several other factors to consider in competitor analysis. To create an accurate assessment of how your business compares to others, it is critical to include as much information as possible. You'll need to gather information about potential competitors' features, pricing, service quality, strengths, and weaknesses. You have the option of creating your own competitor analysis or using a competitive analysis template.

Find all of the features that each direct competitor's product or service has. Keep this in a competitor insight spreadsheet to see how businesses compare to one another. This helps you determine who your main competitors are in your market. Don't completely dismiss larger competitors, as they have a lot to teach you about how to succeed in your industry. Instead, follow the 80/20 rule: 80 per cent direct competitors (companies with comparable market shares) and 20% top competitors.

• Pricing: Determine how much your competitors are charging and where they fall on the quantity vs. quality scale.

• Marketing: What marketing strategies does each competitor use? Examine your competitors' websites, social media presence, event sponsorships, SEO strategies, taglines, and current marketing campaigns.

• Differentiators: What distinguishes your competitors, and what do they promote as their best qualities?

• Strengths: Determine what your competitors do well and what works for them. Do the reviews indicate that they have a better product? Do they have a strong brand awareness?

• Weaknesses: Determine what each competitor could do better. Is their social media strategy shaky? Is there no online store? Is their website up to date? This knowledge can provide you with a competitive advantage.

• Examine your competitors' geographic locations as well as the regions they serve. Are they physical businesses, or does the majority of their business take place online?

• Culture: Assess your competitors' goals, employee satisfaction, and company culture. Are they the type of business that advertises its founding year, or are they modern startups? Read employee reviews to learn about the company culture.

• Customer reviews: Examine your competitors' customer reviews, noting both the positives and negatives. Examine 5-star, 3-star, and 1-star reviews in a 5-star system. Tip: Three-star reviews are frequently the most honest.

Competitive analysis should be viewed as an ongoing process in which your company continues to understand its competitors' strengths, weaknesses, opportunities, and threats. Most businesses already collect information about their competitors; however, many small business owners do not recognize this as competitive analysis. The difference is the quality of information gained or lost as a result of using an outside source. The most important thing to remember, in our opinion, is to recognize that any information about your competition is considered competitive analysis and to think about it in that context.

There are numerous business advantages to having insight into the competitive landscape, particularly if you track products, prices, staffing, R&D, and other aspects of the competition on an ongoing basis. For example, if your company sells computer monitors, tracking your competitors' products, price points, staff levels, social media traffic, and promotion schedule could provide significant insight into their company over a year and even more insight over a five-year period. This information is gold for prospective business buyers during due diligence.

The following are some of the advantages of conducting and presenting a competitive analysis report to your business’s potential buyers. These benefits lure business buyers into agreeing to your terms as a business seller:

• Recognizing the market

• Improved customer targeting

• Forecasting market potential

• Monitoring the economic climate

• Product tracking for competitors

• Pricing compared to competitors

• Possibilities for the tertiary market

• acquiring new customers

Business buyers, typically look for prospective earnings and opportunities. An accurate competitor analysis report comes in handy to attract potential business buyers into closing profitable deals with the business sellers. Thus, do not underrate competitor analysis when you prepare to sell your business.

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