Great question, there are four different types of competitors, smaller than your business, the same size as your business, bigger than you, and market giants. Let’s look at each one of them,

Smaller (than you): a business that has fewer clients, offers less number of services or products, has fewer resources and employees compared to your business, would be considered as a smaller business than yours.

Similar (size business): a business that is almost the same size, sits in the local area, has an almost equal number of employees, offers a similar number of services or products.

Bigger (than you): a business that is relatively bigger than you in terms of employees, presence, and product or service offerings, but your business can catch up in the next 3 years.

Market Giants: Business you are in the business for a long time, has way too many resources and offerings. It will take significant scaling and planning for your business to reach there.

The biggest mistake businesses do is to either pick up smaller or similar businesses or they end up picking up market giants (that’s how we want to be in the future). Now if you picked up smaller and similar then you would miss out on what bigger players are doing and the analysis will show us that we are doing great or at par with competition while the problem with picking up market giants is you have a fairly low budget and marketing resources and your marketing goal will be significantly different.

The best way is to leave our smaller and market giants and focus on bigger and similar businesses, especially the local competitors who have the same or bigger business size as yours. So you should pick one similar business and two bigger businesses for competitor analysis.