Knowing your competition is one of the most basic — and most overlooked — prerequisites for running a business strategically. It's easy to have a sense of who the competitors are, but far harder to genuinely put into words where the difference lies, and where the business itself is strongest and weakest relative to them. This article goes in depth on how to do a structured competitor analysis — and why it's also relevant if you're considering selling the business.

Why is it important to know your competition?

A competitor analysis helps you understand where your business differs from the alternatives — on price, product, quality, service or distribution — and where you're vulnerable to customers choosing a competitor instead. Without that insight, you risk making strategic decisions blindly, and you leave a gap in your business plan that a buyer or investor will sooner or later ask about.

Porter's Five Forces: Understand the competitive intensity in your industry

Michael Porter's model from 1980 is still the most widely used framework for understanding how competitively intense an industry is, and what drives it. The model looks at five forces:

  • Rivalry among existing competitors: How many do you compete directly with, and how fierce is the competition on price and product?
  • Threat of new entrants: How easy is it for new businesses to enter the market?
  • Threat of substitute products: Are there entirely different solutions customers could choose instead?
  • Buyer bargaining power: How easily can customers push down your prices or switch to others?
  • Supplier bargaining power: How dependent are you on specific suppliers, and how much power do they have over your costs?

Together, the five forces give a picture of how hard or easy it is to run a profitable business in your specific industry — and it's often one of the first things a professional buyer will form their own view of.

SWOT: Compare yourself directly with your key competitors

Where Porter's Five Forces looks at the industry as a whole, a SWOT analysis (strengths, weaknesses, opportunities and threats) is a good tool for comparing your business directly with one or more named competitors. Do a SWOT for your own business, and a corresponding one for each of your 2–3 most important competitors, so you can see the differences side by side.

How to do the competitor analysis in practice

  • 1. Identify the real competitors: Both the direct ones (same product, same market) and the indirect ones (other solutions to the same customer need).
  • 2. Map their product and pricing: What do they offer, and what does it cost compared to you?
  • 3. Assess the differentiation: Where do you genuinely differ — not in the marketing, but in practice?
  • 4. Build a benchmarking overview: Put your own business and the key competitors in a table, and rate each on the same parameters (price, quality, service, delivery time, reputation).
  • 5. Assess your dependency: On individual customers, individual suppliers or individual partners who could exploit the competitive situation against you.

Why is this relevant when selling a business?

A documented, up-to-date competitor analysis shows a potential buyer that the business is run with a deliberate view of its own position — not blindly. It's also something a buyer will investigate regardless as part of their own due diligence: is there a competitor growing faster? Is the market share under pressure? Is the business's differentiation genuinely sustainable? If you can answer those questions yourself, the deal comes across as far more secure to the buyer, and you avoid being caught off guard by questions you hadn't prepared for.

If instead there are signs the competitive situation is changing unfavorably — without it being reflected in the business's strategy — an experienced buyer will often discover it, and it can be used as an argument for a lower bid. This applies whether it's a smaller company or one of the larger businesses for sale in the industry.

Frequently asked questions

How often should I update my competitor analysis?

At least once a year, and always well in advance of starting a sale process.

Is a competitor analysis the same as a market analysis?

No, but they're closely connected. The competitor analysis looks at the businesses you compete with. If you want to understand the market as a whole — size, growth and development — you can read our walkthrough of how to know your market.

Should I share my competitor analysis with a potential buyer?

It's often an advantage to be able to present it when the buyer asks — it signals that you have a handle on your position, and it can make the due diligence process faster.

Want help preparing your business as well as possible for a sale? Book a no-obligation call with us.

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