Competition
Your competition and what you know about them is never given enough attention in investment proposals. Of course, investors want to hear what threat competition poses. And most uninitiated capital raisers default to competitive threat from within the industry and leave it at that.
But there is so much that can be gleaned from an analysis of the competition – most of it I think you will know, have studied, or perhaps intuitively appreciate, but rarely consider the need to document it in proposals.
Validation - If you are launching a new concept what in the competitive landscape can you lean on to validate your idea, concept, business model or technology. Even if you venture is not new, drawing parallels to our successful or successful approaches to solving the problem are critically important to document
Substitutes – threats to your solution come from direct equivalents but also from substitutes, and doing nothing is one of them. Your target audience has to act in some way to take up your offer. Is the offer sufficiently valuable to their cause to get off their behinds?
Competitive Weakness – what is weak in your competitive set that lends support to you ramping up or otherwise launching this venture
Competitive Strength – what is strong in your competitive set that lends support to you copying it (all be it finding a niche of your own) and still not find yourself in direct competition with a strong competitor
New Entrant Threat – if you have a mind blowing business proposition any omission of a discussion of the threat of new competition is ill advised. There is no doubt, you will have increased competition . The question is what will you be doing to stay ahead of the game.
Threat of Supplier & Buyer Bargaining Power are also discussed by Michael Porter in his famous 5 Forces model. It is a worth a Google.
The key to your competitive analysis adding value to your business, is to determine what is most the successful route to success from your competitive landscape (either from weaknesses you observe or otherwise strengths), determine what the critical success factors are, show what you have learned from this and how you are going to manage your business around them.
Tip from the Coal Face:
Perhaps having read through this, you will now not make this mistake. But for the record, if you feel the urge to state that you “don’t have competition”, then re- read what is outlined above. Best case scenario is that you have not appreciated the definition of competition, worst case investors will assume you have not considered the true context of what you are embarking on and will walk the other way.
