You should already know about the markets in your target industry. What about the businesses operating outside of your target industry, though? You need to know of any businesses that meet the needs of your target customers and you need to demonstrate to investors that you have factored their influence into your equation.
In other words, you must be able to identify your competitors in a considerable amount of detail. You should be able to discuss how long they have been in business and how they initially entered the market. You should know how much of the market they control and what their goals are, if any, for expanding their market share in your industry.
Before you get too excited about presenting your information on your competitors, however, you need to draw the distinction between the various types of competitors - direct, indirect, and future.
Your direct competitors are those companies that are directly competing for the same market as you. Typically they sell the same types of products and services and have similar business operations and models to your own.
Your indirect competitors are those who compete for a similar market or one of your markets, or perhaps sell the same products and services without specifically targeting your market. Your indirect competitors are basically those businesses to whom your target market may turn to address their particular needs, rather than turning to you, but the businesses themselves don't necessarily do the same thing as you.
Lastly, there are the potential new competitors that you face. You have to be aware of the possibility that new and even existing businesses will take note of the opportunities in your industry and the success of your business. In doing so, they may well want to emulate your success by entering the same business as you.
You should be able to show investors that you are available of all these three types of competitors by profiling them in your business plan.
The Face of the Competition: Knowing your competitors, direct and indirect
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