How to do a competitor analysis for a small business

You know roughly who else does what you do. You could name three or four of them without thinking. What you probably can't say is where they are genuinely better than you, where they let customers down, or how to describe the difference to a prospect without sounding bitter about it. That gap is what a competitor analysis fills, and you can fill it in one afternoon with a laptop and no budget.

What a competitor analysis is

A competitor analysis is a short written comparison of you and the few businesses your customers might choose instead of you, covering what each one offers, what it charges, what its customers say about it, and where it is strong or weak.

The method, step by step

Block out about four hours. Use a plain document or spreadsheet with one row per business, and keep the same columns for every row so the comparison stays fair.

Step 1: Choose three to five businesses

Start with the businesses your customers actually weigh you against, which is a shorter list than "everyone in my industry". Ask yourself who your last few lost enquiries went with, and who customers mention when they tell you what they were comparing. Include one alternative that isn't a business at all, such as doing the job themselves or asking a mate. For many small businesses that alternative is the most common rival.

Step 2: Collect what is public

For each one, open their website, their Google Business Profile (the listing that appears on Google Maps), and their main social account. Record what they sell, what they charge or how they quote, how you book them, and what they promise. Also check the Meta Ad Library, a free tool from Facebook and Instagram that shows the ads any business is currently running. The ads show you what they think their best pitch is.

Step 3: Read the reviews properly

This is the most valuable hour of the afternoon. Read at least a dozen reviews per competitor, and read both ends. The five-star reviews show what they are genuinely good at, in the customer's own words. The one-to-three-star reviews show where they fall short. Copy out repeated phrases word for word. Then do the same with your own reviews, because you want to be measured by the same standard you apply to everyone else.

Step 4: Go through their front door

See how easy each one is to book. Note how many steps it takes, whether they answer quickly, and whether the reply feels like a person or a template. Only send an enquiry if you would plausibly be a customer. Otherwise, walking through the booking flow without submitting it tells you most of what you need.

Step 5: Write three lines per competitor

Finish each row with three plain sentences: what they are genuinely better at, where they are weak, and who they suit best. The third line is the one people forget, and it matters because most competitors are simply a better fit for a different customer.

A worked example

The business below is invented for illustration. It is not a client. Imagine a mobile mechanic working in the outer suburbs of a mid-sized city, comparing herself with three rivals.

Reading her own reviews alongside these, she notices that her customers keep writing about the same thing: she explains what is wrong with the car and shows them the worn part. None of the three rivals get that praise. She also notices, less comfortably, that her booking process takes more steps than the other mobile mechanic's. So she has one real strength, one real weakness, and a clear picture of who she is up against on each.

What good looks like versus what most people produce

Most people produce a feature checklist: a grid of ticks and crosses showing that they offer everything and the competitors offer less. It feels satisfying and it is nearly useless, because it only contains things you already believed.

A useful analysis has a few recognisable traits:

• It names things the competitors do better than you, and says so plainly.
• It uses customers' own words, quoted from reviews, rather than your description of what customers care about.
• It describes each competitor by who they suit, which makes the differences feel like fit rather than rivalry.
• It fits on one or two pages, so you will read it again.
• It ends in decisions. A list of observations with no decisions is a research diary.

The three mistakes that make it useless

1. Only including rivals you look down on

It is tempting to study the competitors you consider sloppy, because the comparison is flattering. The ones that teach you something are the ones winning work you wanted. If your list contains nobody you feel a little uneasy about, it is probably the wrong list.

2. Comparing on what is easy to see

Prices, follower counts and website design are visible, so people compare on them. Customers usually choose on things that are harder to see, such as whether the business turned up, whether it communicated, and whether they felt looked after. Reviews are where those things show up, which is why the review hour matters more than the pricing hour.

3. Treating every gap as an opportunity

You will find things competitors don't do. Some of those gaps exist because customers don't care about them. Before you build a strategy on a gap, check that customers have actually mentioned it, in a review, an enquiry or a conversation. If nobody has asked for it, it may be an empty space, and a lack of competitors there says nothing about demand.

What to do with it once it is written

This is the step that turns a document into something that helps you. Work through these in order.

1. Write one sentence describing who you are best for and why. Take it from the intersection of your strongest review language and the weakest spot among your rivals. In the example, that could be "the mechanic who shows you the worn part and explains the fix before you pay".
2. Sort your weaknesses into three piles. Fix what is cheap and quick (the mechanic can shorten her booking form). Accept what you deliberately won't compete on (she will not win on being cheapest). Refer on what is better done elsewhere (a big job needing a hoist can go to the workshop, and the customer remembers who was honest).
3. Put customer language on your website and in your quotes. The phrases repeated in reviews are already the words that persuade people like your customers. Use them in headlines, service descriptions and your Google Business Profile.
4. Talk about the difference without naming anyone. Describe what you do and who it suits, and leave the comparison to the reader. "If you like to understand what is being done to your car, we are a good fit" reads as confident. Running down another business reads as bitter, and it invites people to wonder what the other side of the story is.
5. Put a date in your diary to redo it. Markets move, competitors change their offers, and your own reviews keep accumulating. A light refresh of the reviews and pricing columns every so often keeps the document current without another full afternoon.

Be aware that this exercise will not tell you what will happen next. It gives you an accurate picture of where you stand and a set of choices, and the choices are still yours to make.

If you would rather not spend the afternoon

Doing this properly takes an afternoon, and it is worth doing yourself at least once. If you would rather have it done for you, a Competitive Analysis built from your own answers is $99.