Foundation 14 of 20 · Assess
How to Do a Competitive Analysis for a Small Business
Your Real Competition Is Whoever Your Customer Considered. Even If They Sell Something Completely Different.
"Nobody else around here does what I do. Who am I even competing with?" Anyone who wants the same customer's money and time. Here is how to do a competitive analysis that compares what your customers actually compare, shows where you are at risk, and tells you where not to bother competing at all.
Last Updated: 11/02/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Is a Competitive Analysis?
Textbook Definition
A competitive analysis is a structured comparison of a business against the alternatives its customers could choose, assessed on the attributes those customers use to make a purchase decision.
In Plain English
It is a simple table. Across the top go everyone your customer might pick instead of you. Down the side go the things your customer chooses by, like speed, price, or comfort. Learning how to do a competitive analysis is mostly learning to fill in that table from the customer's side, not from your own pride.
Why It Matters
Why Do Owners Think They Have No Competition?
When nobody nearby makes exactly what you make, it is easy to believe you have no rivals. Customers do not shop that way. Someone grabbing breakfast on the way to work is not comparing two waffle shops. They are deciding what to do with a few dollars and a few minutes, and anyone who can win either one is in your market.
That is the idea behind competing for the same coin: the product does not decide who your rivals are. The customer does. A coffee shop competes with the gas station and the office kitchen. A good competitive analysis shows where you win, where you are exposed, and which fights you can skip.
Signs you have this problem:
- You define your competitors only as businesses that sell the same product.
- You have never timed how long a customer waits.
- You compare yourself on what you are proud of, not on what customers choose by.
- A new business opening nearby does not worry you because "they sell something else."
- Your first idea when a rival appears is to copy their product.
- You have never asked a customer where else they almost went.
What It Looks Like
What It Looks Like When the Threat Sells Something Else
From the Fabled Forest · Chapter 14
Louie Waffles, a Labrador, ran Waffle Woofs on the square and had a line out the door every morning. Mrs. Owl-Willow met Jade, a jaguar who had counted foot traffic and was opening a juice bar across the square in spring, promising three minutes from door to cup. Louie shrugged it off. She sold juice, he sold waffles.
Doctor Owl timed Louie's line at nine minutes and asked a different question: who else wants that early morning coin? Louie named the general store's day-old buns and Frankie's breakfast slice, then saw that 45 of his 60 morning customers bought a drink. Mrs. Owl-Willow told him plainly she would cross the square for juice and come back for the waffle, but not to wait nine minutes in the snow. Doctor Owl drew a table with four rivals across the top and five things customers cared about down the side.
Louie won three of five lines but lost on speed and drinks. The roughly twenty hurried mill workers at risk were worth about 210 coins a week. Instead of making juice, he planned to reopen an old coal hatch as a side window, a waffle in a sleeve with a lidded cocoa, aiming for ninety seconds. Doctor Owl reminded him to time it before promising anything, and Louie decided to welcome Jade with a waffle on her first morning.
Louie Waffles's story is Chapter 14 of Strategy for Small Businesses, Book 6 of Dr. Paul's Fabled Forest Business School Series.
The Fix
How to Do a Competitive Analysis in 4 Steps
One table, filled in honestly, and one decision about where to win.
List everyone your customer might choose instead of you.
Include businesses that sell something different but compete for the same money or time. Think about what your customer would do if you were closed today.
Write down four or five things customers choose by.
Speed, price, comfort, convenience, quality, a place to sit. If you are guessing, ask a handful of customers. The list should be theirs, not yours.
Build the table and mark the winner of each line.
Rivals across the top, customer priorities down the side. Be honest, and note which marks you know and which you are guessing. This table is the core of a competitor section, and Dr. Paul's business plan templates include a ready-made place for it. Weak lines also belong in your SWOT analysis.
Choose where to compete.
Pick the one or two lines that matter most to your best customers, be clearly better there, and stop worrying about the others. Then build that choice into how you differentiate your business. If the whole market is shrinking, check the industry life cycle before you fight over share.
Dr. Paul's Insight
The mistake Dr. Paul sees most often is an owner trying to win every line on the table, or rushing to copy the new rival's product. You will usually be worse at their thing than they are. Spend your effort where your best customers feel the difference. Louie did not need juice. He needed a shorter wait.
Sample: Louie's Competitive Analysis Table
Here is the table Louie and Doctor Owl filled in, rewritten as a sample you can copy. Put your own rivals and your own customers' priorities in their place.
| Warm | Waffle Woofs wins. Frankie's slice is close. Store buns are not. |
| Price | Waffle Woofs and the store, a coin or less. Jade's juice will be two coins. |
| A seat | Waffle Woofs, six tables. Jade has two window seats. Truck and store have none. |
| Fast | Store and truck win. Jade promises three minutes. Louie takes nine (timed). |
| A drink | Jade wins with fresh juice and cider. |
| At risk | About 20 hurried customers, 20 waffles + 15 cocoas = 35 coins a morning, about 210 a week. |
Illustration from the book. Louie wins three of five lines. The two he loses point to the decision: compete on speed, not on juice.
Watch
Watch: Writing the Competitor Analysis Section
Two videos from Dr. Paul. The first walks through how to write a competitor analysis section for a business plan. The second is a short business plan writer's tip on the same topic.
How to write a Competitor Analysis Section for a Business Plan
Dr. Paul Borosky, DBA, MBA. (7:23)
Business Plan Writer's Tip #45 for Virginia Beach, VA.: Competitor Analysis for Business Plan
Dr. Paul Borosky, DBA, MBA. (3:17)
From the Book
Read a Passage From Chapter 14
Chapter 14 · Competitive Analysis
A Jaguar in the Window, a Waffle on the Griddle: A Labrador’s Morning Coin
“I would cross the square for the juice. I would like a fresh juice in the morning, if someone made it for me, and I do not always want to make my own.” She looked at him over her lavender spectacles, kindly. “And I would come back here for the waffle and the warm corner. Every time. But not if I had to wait nine minutes on the step in the snow. Not at a quarter past eight.”
Louie sat very still.
“Not the waffle,” he said. “The wait.”
Read what Louie decides to build instead of a juice press in Strategy for Small Businesses, Book 6 of Dr. Paul's Fabled Forest Business School Series.
Get the Book on Amazon →FAQ
Competitive Analysis Questions Owners Ask
How do I do a competitive analysis for a small business?
Who counts as a competitor if nobody sells what I sell?
Should I copy a new competitor's product?
How do I know what customers choose by?
Keep Going
Related Foundations
Competitive analysis is one of the honest looks an owner takes before choosing a strategy. These pages go further. New to a term on this page? Every one is in the strategy glossary.
How to Do a SWOT Analysis
Four honest boxes for what is inside and outside your business.
What Is the Industry Life Cycle?
Find out whether your market is growing, flat, or shrinking.
What Is Environmental Scanning?
Catch new rivals and changes before they reach your door.
What Is Strategic Focus?
Pick a few things to win at and say no to the rest.
Written by Dr. Paul Borosky, DBA, MBA, business consultant and author of Dr. Paul's Fabled Forest Business School Series. Want help sizing up your competition and deciding where to win? See growth plan and consulting options.
This page is for general educational purposes only. It is not legal, financial, or other professional advice. Dollar figures are illustrations. The Fabled Forest and its characters are fictional. For decisions about your own business, consult a qualified professional.