Like most Australians, I’ve spent the last few weeks in awe of the talent and determination of our elite Olympic and Paralympic athletes. Apparently exercise rates soar every four years — according to Deloitte, almost half the participants in a post-London survey intend to take up a new sport and 1-in-3 of these want to join a gym.

Of course, it isn’t necessarily fitness they’re after — it’s a makeover, the success a lean and powerful body represents. However, athletes know there’s much more to winning... one thing comes up over and over again in interviews, and that’s knowing the competition.

Mary Lou Retton, the pint-sized dynamo who stole everyone’s hearts at the 1984 LA games, is a prime example. I love “where are they now” stories about former champions, so was glued to YouTube as a now 40-something Mary Lou took us, step-by-step, through her gold medal performance in the women’s all-round event.

Yes, she talked about her physical preparation, notably knee surgery just weeks before the games, but the focus of the conversation was her main competitor, reigning world champion Ecaterina Szabo. It was a “dog fight” and Mary Lou’s eyes never left Szabo — she knew her competitor’s strengths and weaknesses, which she used to set a benchmark for her own performance, and to feed her own energy and purpose.

So what does this have to do with small business?

It’s this... your personal “fitness” is only half your task. You also need to be prepared for what comes down to a competition over customers, and the best way to succeed is to, first, know who you’re up against and, second, use that information to develop an advantage. This is called a “competitor analysis”.

Who are your competitors?

I must confess that the competitor analysis is usually the flimsiest part of the business plans I see, and the reason is that so many small business owners don’t understand who their competitors are.

Unfortunately, most assume a competitor is a company that sells the same product or service. Not so... a real competitor is someone who offers the same solution to a specific need in your target market.

For example, Company X sells beautiful, handcrafted greeting cards and their target market is young, single, middle-class women with expendable incomes who value quality, uniqueness and creativity. Not everyone who sells greeting cards is a competitor — this market is not looking for discounted or run-of-the-mill products. However, less obvious companies, such paper craft suppliers or greeting card software developers, are because they provide other ways to fulfil the desires of Company X’s target market.

Identify your target market

Obviously then, defining your target market is the first part of a competitor analysis. Start with a broad overview of your industry and general market... the Australian Bureau of Statistics and your industry peak body are probably the best sources of this information. However, you’ll also find your existing customer base, surveys, Google or blog searches, industry journals and networking events useful.

Next, create a detailed profile of your ideal customer. Picture this person and describe them, first, in demographic terms:

• Age
• Social class
• Sex
• Income
• Location
• Life stage.

Then, describe their:

• Lifestyle
• Values
• Goals
• Shopping habits
• Product or service expectations

How to find your competitors

Now that you know what to look for, identifying your competitors is a cinch.

Unless you’ve been in your industry a long time, however, you probably need to find who else is out there.

Return to your peak body to look through membership or event participation lists, and check the advertisements or guest articles in industry journals. Also try:

• The Yellow Pages
• Google searches
• Conference or trade show lists
• Networking at industry events
• Your loyal customers
• Who people are talking about or recommending on forums and social media.

If you end up with a plethora of competitors, narrow your list to the companies that currently dominate your market or those that, for whatever reason, pose the biggest threat to your business.

Become a private eye

Don your deerstalker and pipe because the fun is about to start... this is where you dig up information on your competitors and compile it into a table for neat, easy comparisons.

In addition to the resources already listed in this article, check out:

• Internet presences (websites, social media, advertising, forums)
• Corporate identity (business cards, logos, stationery, public relations, values)
• Sales aids (brochures, catalogues, rate sheets)
• Strategic plans and reports
• Investor resources and briefings
• Government registers (Australian Business Register, IP Australia)
• Your own observations from visiting or buying

Time for self-reflection

You’ll notice I’ve snuck an extra column on the end of the table... this is for you to describe your company’s position, which will help you compare your offering against that of your competitors and, thus, develop a stronger strategy in the next section.

Be careful of under or over-estimating yourself. Ask a mentor or dispassionate associate if you’re too immersed in your own business to have an objective eye.

Let’s get analytical

Now that you have your raw material, it’s time to analyse your competitor’s strengths and weaknesses, and explore the implications these have for your business. Create a table for each competitor, as well as your own business.

This activity gives you a clear idea of your position in the market place. Even more important, it leaves two streams of findings that can be a springboard for enhancing your performance:

1. First, a list of areas for improvement, with the benefit of benchmarks against which to set your goals and the beginnings of strategies to raise the bar
2. Second, a list of your company’s advantages on which to capitalise. This can lead to more than emphasising your strengths in marketing and promotional activities — you may discover points of intersection that lead to opportunities for mutually beneficial strategic partnerships with some competitors, turning them, as such, into allies.

Final steps

Who would have thought assessing your competitors could be so enlightening! Squeeze the maximum benefit out of your hard work by using the intelligence you’ve gathered to revitalise your strategic plans.

It may also spark additional questions, such as:

• Does the analysis of your own business clash or compare with what’s in your business plan?
• If the comparison is favourable, is it time to set new goals to take your business to the next level?
• Have you gained a clearer vision or new focus for your business?
• What’s your point of difference?
• Has your analysis revealed gaps in the market that you can exploit?