Who are your competitors? How do you stack up against them? Here are some ways to research your competition and know how to beat them.
For a startup or small business, the most important component of building a successful business is knowing who you’re up against. I’m talking to myself here as well.
As entrepreneurs, our natural tendency is to disregard the competition. The reason our company is better than our competitors is obvious. Why else would we shun the safety of a steady paycheck with a good benefits package? As entrepreneurs we think our company is so revolutionary, so much better than all the current offerings, that we’re typically doing a victory lap before we have even started the engines of our business.
We all have at least one area in which we think we’re leaps and bounds ahead of the competition. Maybe your company has superior technology that allows your customers to be more productive. Maybe you can offer better pricing that allows your customers to be more profitable. Maybe your unbeatable customer service creates fewer headaches for your customers. Or maybe you have some intellectual property that ensures no one can build a solution in the market you are nurturing.
There are two things I think should be mentioned here with the hopes of dissuading you from thinking your business will become an overnight success. Or even more dangerous, the trap of thinking the competition will be irrelevant due to some advantage your business may have.
The first is a quote from Sam Walton in his book Sam Walton: Made in America. I first read the quote in Jim Collins’ book Good to Great.
Somehow over the years, folks have gotten the impression that Wal-Mart was something I dreamed up out of the blue as a middle-aged man, and that it was just this great idea that turned into an overnight success. It’s true that I was forty-four when we opened our first Wal-Mart in 1962, but the store was totally an outgrowth of everything we’d been doing since Newport—another case of me being unable to leave well enough alone, another experiment. And like most other overnight successes, it was about twenty years in the making. (emphasis added)
The second is from Nassim Taleb’s book Fooled by Randomness.
The survivorship biases … [arises] from the fact that we see only winners and get a distorted view of the odds … the fact that luck is most frequently the reason for extreme success…  (emphasis added)
But is that advantage enough?
While it’s important that your business is truly differentiated from the competition, a businesses become successful because it accomplishes its plans.
Truly knowing your competitors involves knowing their business so well that you could run it with little to no training if given the chance. It involves knowing their sales, number of customers, and estimates of their gross and net margins. You should research their compensation & benefits structures, key people (LinkedIn is great for this), key suppliers, and marketing strategies. Another area to research is how your competitors are perceived in the marketplace. This can be a gold mine when you are building your own marketing plans and strategies.
The fun part: get out of your office
If you’re looking for a great spot on how to get started, I recommend reading this article from the Wall Street Journal. One of my favorite things about the article is that it emphasizes good old-fashioned “boots on the ground” research. The article states:
… you can’t find out everything on a computer. It’s important to talk to people in the know, says Angelo Santinelli. … Pump anyone you can for information about your rivals, whether it’s customers, suppliers or employees.
… Joe Giacalone, owner of Arch Painting Inc., often uses conferences and trade shows to speak to suppliers.
“If I know how much of a certain product my competitors are buying, I can gauge their sales volume or what they specialize in,” he says. “I can ask about their reputation from the supplier’s standpoint.”
The rainy-day part: get back to the office
Now that you’ve been out of the office, Chris Newmarker at Finance & Commerce has found a really neat online tool for researching your competitors. This seems particularly useful for comparing your pay package with the market at large or evaluating new geographic markets. If you’re a a visual person be sure to check out the SizeUp tool.
I’ve also previously mentioned the James J. Hill Research Library. The library used to be a great resource only if you lived in Minnesota; however, their shift to the web has made them a superb resource for small businesses throughout the US. They have a great staff of librarians who can help you find the best resources to research your competitors and size up the market your business operates in.
Put it on paper
What I recommend new businesses do is conduct a one-page summary on each of their top 3 to 5 competitors. This summary should include:
- Products & services
- Geographic reach
- Customer base
- Sales volume
- Where do their sales come from?
- Key people w/ brief bios
- Ownership structure
- Financing structure
Put your research to good use
All of this research is useless if you don’t put it into action. Take what you’ve learned and craft a strong strategy around your competitors’ weaknesses. Even with a strong strategy, the best way to ensure you beat your competitors is to out-execute them. Be the most consistent, promptly return phone calls and emails, and get the job done. Doing what you do, more quickly and consistently than anyone else will make you run circles around your competition.
Now get out of the office and build your business!
This post is in a series we are writing for National Small Business Week. For all of our posts on National Small Business Week, click here.