Explaining your competitors to investors: our 4 top tips
Remember these simple rules when explaining your competitors to investors.
1. Never say 'we don't have any competitors'
Claiming a lack of competitors can actually be a red flag to investors. If no-one else is doing it, it raises the question of whether there's actually a market. The simple truth is that every business has competitors – it's just a matter of degree.
As well as identifying your direct competitors (those with a product or service similar to yours), you should also consider the wider pool of indirect competitors. To identify these, look at it from your customer's perspective. If they weren't using your product or service, what else would they use?
2. Be prepared with thorough competitor research
Unless you pay to outsource it, researching your competitors mostly comes down to gathering intel yourself. This means talking to customers, scouring the internet and media reports, and following industry forums and events.
Encourage your sales team to bring you any intelligence they pick up, and record everything in your CRM system.
While it's tempting to focus on your immediate geographical markets, make sure you're scanning the global horizon. If there's a similar business in Europe, for example, don't assume they won't move into your patch.
3. Plot your point of difference
Once you've identified who your competitors are, you'll need to carry out a competitive analysis.
This is essentially where you plot your business against your competitors – showing how you compare. You will share similarities with some, and differences with others. The ultimate goal is to succinctly identify the sweet spot that sets you apart.
4. Don't just focus on price
While price can definitely be a valid competitive advantage, it's only part of the mix.
If having a lower price is your sole advantage, you're presenting your product or service as a commodity – and commoditised markets aren't particularly attractive to investors. If margins become squeezed, it essentially becomes a race to the bottom.
Investors will be more interested in other factors (or a combination of factors) that make your business competitive.
Learn more with InvestEd
We've got plenty more resources and advice on explaining your competitors to investors. Our free online investment-ready platform, InvestEd, has a wide range of topics to guide you through key stages in the capital-raising process*.
You can work at your own pace, choosing the topics that are most relevant to you. We suggest you check out these two modules:
Understanding your key competitors
This module steps you through the process of defining your competitors (both direct and indirect).
Competitive analysis frameworks
Here, you can present your competitor analysis to investors in various ways – we explain these options, and how to format them.
*Note: you'll need to sign up to access the free content on InvestEd, but it only takes 2 minutes.
