Competitor Analysis for Small Businesses

Start with the businesses a customer would actually call instead of you, not just the ones you think of as rivals. The US Small Business Administration says a competitive analysis should identify your competition by product line or service and market segment¹, and should assess indirect competitors too. For one town, three to six is usually enough.

• The two or three that come up first when a customer searches for your service nearby
• The one you lose jobs to most often, whatever its size
• The largest firm in your area, whose prices customers will hold up against yours
• One indirect alternative, such as a home warranty plan for a heating and air firm

Note what each competitor sells, charges and promises, and date every entry, since prices change.

Treat each price as a clue to how the business makes money. A free service call still has to be paid for, often inside the repair quote, and the reviews may show it. When prices aren't published, the best evidence is a real quote from a job you lost or from a customer who switched to you.

If one rival keeps beating you, give it a full competitor teardown, with a source and a date for every fact.

Reviews are the richest evidence you'll find about a local rival, and customers act on them. In Michael Luca's Harvard Business School study of Seattle restaurants, a one-star increase in Yelp rating led to a 5% to 9% increase in revenue². The effect came from independent restaurants, not chains.

Gather every one- and two-star review from the past two years for each competitor, noting the site and the date. Skim the five-star reviews too: what customers thank a rival for is the standard you'll have to meet.

Then screen out fakes. In a Harvard Business School working paper, Michael Luca and Georgios Zervas found that Yelp's filter flagged roughly 16% of restaurant reviews as suspicious³. Restaurants facing more competition were more likely to get unfavorable fake reviews, so a rival's worst reviews may include some planted by its competitors. Set aside reviews that show these signs, and note how many you left out:

• A burst of reviews within a few days
• Ratings with no middle, only fives and ones
• The same phrases from different reviewers
• Almost no complaints at a busy firm, which can mean reviews were bought or removed

Now turn the reviews into numbers. A count keeps one vivid story from outweighing a pattern.

1. 1

   Name the complaint types

   Build six to 10 types from the reviewers' own words, such as "never showed up" or "the quote doubled."

2. 2

   Count mentions, not reviews

   One review can hold several complaints, so tally each mention under its type, competitor by competitor.

3. 3

   Compare rates

   Divide each firm's negative reviews by its total. A firm with 900 reviews will usually have more complaints than one with 140.

4. 4

   Look for clusters

   See whether a complaint piles up at firms that share a practice, such as waived fees. Treat that as a pattern, not proof.

For each complaint type, ask what the competitor would have to give up to make it stop. Fixing missed arrival windows takes a dispatcher and better scheduling, which any firm can add. Pressure to buy is different when technicians earn commission on sales: it is unlikely to stop unless the firm changes how it pays them.

In a 1996 Harvard Business Review article, Michael Porter argued that competitors can quickly imitate better ways of operating⁵, so few firms keep an edge that way for long. A position lasts, he wrote, only when it rests on a trade-off: "more of one thing necessitates less of another." Complaints born of a rival's trade-offs are the ones worth building on.

Pick one structural complaint that matters to the customers you want, and build your offer around its opposite. In the example, that means technicians on salary, so no one earns more by selling a new system.

Check it with the people you want to win. Ask a few recent customers which of these problems would make them switch firms, and sort what they tell you. If the position lets you charge more, test the numbers first with a pricing template for small businesses.

Put the position where customers look first, starting with your homepage headline. You don't need to name a rival: "Our technicians are paid a salary, not commission" makes the point. If you do compare, keep it provable. The FTC's advertising guide for small businesses says comparative advertising is legal as long as it is truthful⁶, and that you need proof before an ad runs.

Last, list the complaints your position doesn't answer, such as missed appointments and unanswered phones. Those are your own to-do list. Make no promises about them on your website until your reviews show they're fixed.

Rather have the reading and counting done for you? The tool at the top of this page gathers your rivals' public reviews and published prices, then writes up the counts and a position for you to check.