The company’s development potential and its industry competition are two key determining aspects of business valuation. Whether you want to sell your business now or just set it up for the future, both of these factors are damaging to the process. Creating a competitor analysis is one of the finest ways to get this information.
A competitor analysis entails researching your direct rivals to ascertain their advantages and disadvantages in relation to the goods and services offered by your own company, as well as industry norms and standards.
Preparing a competition study can benefit your business in several ways: it can highlight industry trends, identify chances that your competitors may be overlooking, and highlight areas of improvement and adjustment for your own company.
How Do You Create a Competitor Analysis?
It is critical to select three to five tough organizations who compete directly with your products or services while conducting a competition study. This does not necessarily imply that you should select the largest corporations in your field; remember the power of the tiny. Smaller, privately owned businesses might advance swiftly and discreetly in the rankings, going unnoticed.
Once you’ve chosen your competitors, it’s time to assess critical information about each. This can include (but is not limited to) the following:
- Pricing – Understanding how your competitors price their products and services can reveal a lot about how your own items or services rank: are your prices competitive? Are your pricing competitively cheap, or just low enough to provide you a competitive advantage?
- Process – What tactics do your competitors use to manage successful customer relationships? How do they promote their goods and services? What is their secret to success?
- Products and services – What exactly do your rivals offer? What is the connection between their products or services and yours?
- Technologies – How are your competitors using software and digital technologies to recruit customers and position themselves as industry authorities?
- Reputation – How do consumers, third-party distributors, and current/former workers perceive your competitor? Does the corporation add value to the community in addition to the goods it sells? Is the company well-known in its field?
- Sales Revenue – The revenue of a firm is directly tied to its overall success. Sales revenue reflects how much profit a firm makes from its products and services, and it is directly related to growth potential.
- Strengths – What does your opponent excel at? What are they doing to stay ahead of the competition, and what makes them a powerful brand in the eyes of their customers?
- Weaknesses – Where is your rival lacking, and how can your organization capitalize on that weakness?
Obtaining this information can only enable you to become more aware about where you stand in your market. All of these details can be compared and contrasted using a chart.
How Do You Collect a Competitor’s Information?
There are numerous methods for obtaining this information about your competitors. The first step is to make use of the people that are available to you. Your staff, particularly your salespeople, constantly contact with people in your market and are exposed to emerging trends in your business. Discuss their observations with them and find out what they know about your chosen set of rivals.
Another approach to gather data is through your clientele. It is not improper to inquire about other rates that potential consumers may have received. I once pledged to beat any competitor’s price at a business I co-owned if the customer would provide us the competitor’s quote.
We received over 400 bids from throughout the country and used this data to develop regional pricing strategies and to include strong provisions in our own quotes to clients.
In addition to direct sources, it may be important to look for other resources on occasion. For example, your organization can hire a professional provider like Dun & Bradstreet or InfoUSA to gather data. These firms are experts in gathering and evaluating industry data and trends.
Businesses could also resort to the internet for further information. When looking for information, company websites are a wonderful place to start. Use search engines and keywords: you can conduct a thorough website analysis to see where your competitors rank and which keywords you should optimize your website for.
How Can You Use this Information?
Having a competitor analysis on hand can help you understand how your ideal client perceives your competitors. Remember that outperforming your competitors does not imply adopting the same policies and techniques. Using competitor analysis data to adopt new ideas and initiatives can help your organization stand out from the crowd – differences sell, similarities don’t.
The findings of a competitor study can ultimately assist your company in maximizing its worth in the eyes of a potential acquirer, whether a financial or strategic buyer. Comparing your company’s reputation and business valuation to specified criteria and benchmarks will only assist to improve its reputation and business valuation. Furthermore, gathering information about your market competitors can only make you a more formidable opponent.
FAQ
1. What is the purpose of a competitor analysis in business valuation?
A competitor analysis is a strategic research process used to benchmark your company against direct rivals. Its primary purpose during valuation is to identify industry trends, spot market opportunities your rivals are missing, and highlight areas for internal improvement. By understanding where you stand in the market, you can maximize your company’s appeal to potential financial or strategic buyers.
2. How many competitors should I include in my analysis?
Selecting three to five direct competitors. It is crucial not to focus solely on the largest corporations in your field. You should also analyze smaller, privately owned businesses (“the power of the tiny”) because they often move quickly, adopt new technologies faster, and can be formidable hidden rivals.
3. What key data points should I track when analyzing competitors?
To get a comprehensive view of the landscape, you should assess the following eight specific metrics for each rival:
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Pricing: Are they cheaper or premium?
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Process: How do they manage customer relationships?
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Products/Services: How do their offerings compare to yours?
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Technologies: Are they using digital tools to gain an edge?
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Reputation: What is the sentiment among employees and customers?
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Sales Revenue: A direct indicator of success and growth potential.
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Strengths & Weaknesses: Where do they excel, and where are they lacking?
4. What are the best methods for gathering information on competitors?
There are three effective ways to collect competitive intelligence:
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Leverage Internal Staff: Ask your sales team what they hear on the ground.
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Ask Your Customers: Request quotes they have received from other companies (the author notes using this strategy to build regional pricing models).
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Use External Resources: Hire professional data firms like Dun & Bradstreet or InfoUSA, or conduct digital analysis using search engine keywords to see where competitors rank.
5. How does competitor analysis help improve business strategy?
The ultimate goal of this data is differentiation. As the article states, “differences sell, similarities don’t.” By analyzing your rivals’ weaknesses or gaps, you can adopt new initiatives that make your company stand out. This ensures you aren’t just copying their policies but are actively positioning your business as a unique and more valuable asset in the marketplace.
