I’ve found often times the “Competition” and “Market Opportunity” portions of business plans are underdeveloped which can be a fatal mistake. To that end here are a few tips:
- Try to believe other people might actually be as smart as you. Chances are other people have thought of your idea but chose not to (or were unable) to pursue it. Why? Answering this question is one of the most important parts of your business plan. For example, with OleOle no one had pursued the opportunity because (1) it required a significant amount of up front capital (2) the scope was enormous (3) there was no hard evidence it would actually succeed (4) most importantly, even after everything was built the hard part began – penetrating local markets. Knowing these things allowed us to adjust our model (specifically growth strategy) accordingly.
- Complementary services CAN be competition. I spoke with a founder of a startup at the TechCrunch event this weekend (weird, I know), we’ll call him Matt. Matt’s product enables websites to allow users who are already signed in at any one of a number of different sites (Yahoo, Google, Facebook, etc… the list was quite impressive) to be automatically signed in on their site too. For example, if I checked my Yahoo mail and then visited OleOle I wouldn’t have to re-login at OleOle. I asked Matt about Open ID. Matt’s response was, oh no we’re compatible with them too. My thought was… so what?! Hypothetically (and I do mean hypothetically) if OpenID were to take over the entire market, there would be absolutely no use for this service… something Matt hadn’t even considered because he’s “compatible”
- There’s no such thing as ONLY. As in “we’re the only product of our kind” or “we’re the only ones in this space.” Yes it’s possible to create new markets and “needs” (aka wants) and strictly speaking you may be an “only”. However, you’re writing a business plan not an investor deck. The difference is the purpose of the business plan is to help you build the best business possible; the purpose of the deck is to shamelessly pump yourself. Like the saying goes – it’s okay to lie to girls but not to your friends… not that I would know. Find competition. Include it in your business plan. You might actually learn something.
- Completing the competition section should affect your business model/structure. It’s pretty simple. If you’ve finished evaluating the existing market and haven’t tweaked other parts of the business plan you probably haven’t dug deep enough. The tendency is to look for what you want to find – you have a brilliant idea that no one has ever thought of, it’s easy to carry out and will make millions of dollars.
Update: more support for this position here along with many other helpful tips on writing a business plan