StartUp: Who Is Your Competition?

Start-Up! is weekly column on entrepreneurship, start-ups, technology and innovation, powered by the Adams Hub for Innovation.

When talking about competition in the spirit of business, we often hear from fledgling entrepreneurs who proclaim with all belief that “we have no competition….!” Whenever I hear this in business plan competitions or investor pitches, I have to cringe. Although it is often a naïve statement from a passionate entrepreneur, it is usually so much more than that. It is an indication that the entrepreneur has not truly done their homework, but more importantly, it is setting themselves up for a rude awakening or worse yet, potential failure in some magnitude.

What is the definition of competition…? Well there are many, but here’s the one that frames it effectively for me:

Competition is anyone taking a dollar that would otherwise be mine…

This is a very powerful definition, as it forces me to look beyond the folks that do exactly or nearly exactly what I do. For instance, if I want to open a go-kart track in any city in America, who am I competing with? Suppose there are no other go-kart tracks within 150 miles, then are there no competitors? Nope, not likely. On any given Saturday night, there are folks going out, and they have tons of choices as to how to spend $40. They could go to the movies, bowling, dinner, miniature golf, go-karts, etc. So the competition (in this case) is anyone offering entertainment on the weekend, which is much less obvious than other go-kart tracks.

When launching a new business, we must understand where the opportunities are to compete with the companies already in the space. So, how can we understand where the opportunity lies; how can we know if it’s enough to create sustainability?

Understanding the nature of competition is critical, and knowing exactly who is competing in any given market is crucial in understanding values, strengths, weaknesses and market perspective. The latter is where opportunity lies in wait to compete. Being able to compete requires knowledge, value, and tenacity. Understanding competitive weaknesses and market perspective will provide the foundation of information necessary to formulate a viable and defensible strategy for the benefit of the company and especially the market.

Market research and analysis provide the answers to these questions. Ideally all start-ups should conduct a S.W.O.T. analysis to understand their competitive landscape. S.W.O.T. analysis stands for Strengths, Weaknesses, Opportunities and Threats. This analysis should be done not only for the start-up but also for the competition so you can develop the best strategies to compete to not only leverage your strengths but to also capitalize on the competition’s weaknesses.

The first step is to understand your target market—what groups of people are most likely to buy your product or service (demographics—age, gender, marital status, income, etc.), and what is their mindset (psychographics—interests, hobbies, spending habits, aspirations, etc.). The Carson City Public Library offers substantial online research tools and trained staff to help you understand the size of your market opportunity based on demographics and psychographics. Then, the next and crucial strategy for determining your competitive strengths and weaknesses is to talk to potential customers.

While this strategy does not seem novel, the large majority of start-ups never complete this simple but powerful exercise. Simply talking with people, surveying potential customers, or getting feedback from customers of your competition will provide a wealth of information and value. The key is to be open and unbiased with the responses you receive -- it is better to find out there isn’t a need for your product or service than to sink all your savings and time into a business that is destined to fail.

Be certain that the value you bring to the market is real, and compare it to the value of others in the space. Talk to the competitions’ customers to find out what they like and what they don’t like. Find a pattern or consistent message that provides fodder for opportunity. Survey folks, find out if what you want to do is important enough for them to pay for it, and more importantly, will they pay more for it because the value is superior. We all shop for value, so be sure yours can beat the competition!

Matt Westfield is a serial entrepreneur, founder of Entrepreneurs Assembly and Adams Hub for innovation Entrepreneur in Residence and Mentor. Matt can be reached at Matt@EA-nv.org