The final step of competitive analysis is taking the data you've collected and using it to develop a strategy that puts your business ahead of the competition. For each of your main competitors, list "strengths" and "weaknesses." You should be able to list at least five things that each of your competitors does well and five things that they do poorly. Try to remain objective. Look at your rival's strengths and weaknesses from the customer's point of view. Do they excel at customer service? Is their pricing too high? Are their employees well-trained? Is their product of inferior quality?
Entrepreneurs sometimes find it easier to identify weaknesses in their competitors than to identify strengths, but it's important to make a realistic assessment of both. Your competitors' strengths can be an important bench-marking tool for you to use in planning your new business, while weaknesses can be a signal of opportunities on which you might be able to capitalize.
Next, compile a list of strengths and weaknesses for your own business. Will these attributes be enough to set your business apart in your customers' minds? Are you giving them reason enough to switch from your competitors? If you are introducing an entirely new product or service, what will entice consumers to change their buying habits? You may find it necessary to change your strategy or to target a different market based on the information you uncover about your competitors.
For example, when Zobel decided to write a book on small-business taxes, she conducted an extensive analysis of books on the market. Initially, she was discouraged because she felt the existing books adequately covered that broad topic. Examining her own strengths, however, she realized there was indeed a gap in the market: No book addressed the unique tax concerns of female entrepreneurs. She targeted that market segment, and her book, Minding Her Own Business: The Self-Employed Woman's Guide to Taxes and Recordkeeping (EastHill Press, $16.95, 800-490-4TAX) has just hit the bookstores.
Remember that competitive analysis is an ongoing process. Set aside time at least every quarter to re-evaluate your competition, especially as new competitors enter your market, or as you introduce new products and services.
Also, bear in mind that competition can have positive connotations. "When I saw products that were similar to mine, I used to be afraid they were going to take away my customers," says Rice. "Then I realized that what it really meant was that there's a market out there for my product. Competition doesn't scare me now."