WHEN STARTING A BUSINESS, it is imperative to understand that there are two kinds of competitors: direct and indirect.  The direct competitors are businesses that offer same services and products in the same market to you.  Indirect competitors, on the other hand, offer similar services and products to yours, but to a different market.

Establish important metrics

Before you start looking at the level of competition, you will need to determine the metrics, which you will then use to determine the traffic, such as unique visitors, comparing revenues, traffic ranking, average visits, etc.  You can also decide to look at competitive analysis, although it may not be very important. The metrics that are used in comparison of the competition are greatly determined by the specific business.

Latest trends

The recent trends play a vital role in creating a reflection of the current state of the market.  This data is especially essential for businesses that are based in new industries, since there is no past data of the industry to provide comparison.

Establish historical trends

These are essential for helping the business owner, manager, or investor in understanding the growth speed, as well as to establish whether both of the events have similar impact.  For instance, when you are comparing two competitors in the same market, you might realize corresponding growth and down spurts.  Look at the causes of the down spurts.  The dips could have been caused by either external or internal factors that can affect your business.  Determine the frequency of the problem and whether there are measures you can apply to avoid recurring of the blunder in the future.

Monthly and annual growth

Establish the monthly growth rate of the business.  Sometimes, the monthly growth rate may appear high, but if the annual rates indicate something different, they may be deceptive.

Challenge your supposition

Stopping at this stage can make your work easy, but in case you are looking for a comparison that will make more sense, you will need to challenge the assumptions.  For instance, you can establish the visits instead of unique visitors if you had chosen unique visitors for your metric option.

Acquire disconfirming and confirming data

In order to evaluate how your company compares against its competitors, you will need to consider a variety of factors. The revenue model offers a reliable frame for reference.  For instance, if your income model depends of advertising server-up in the course of visits to your site, you are likely to be more interested with the number of visits as opposed to quality of visits. On the other hand, clients with revenue models that depend on advertising emails via RSS feeds or email newsletters will be more interested in investigating the number of subscribers. This information is essential since it helps in creation of different perspectives regarding relative size and growth.