Business Tools: Scoping Out Your Competition
A lot of times, when someone starts a business, they think they are so unique that they have no competition. Wrong answer!
Here’s a clue:
One of the most important things you must do for your business is figure out what the conventional business model is in your industry. By business model, I mean, how does anyone make money, and hopefully profit, from doing what you do?
If you own a bakery, for example, figure out how other bakeries make money selling bread. What are the costs? What price do they sell at? How much profit is normal in the bakery business?
When I was a counselor for SCORE, I always recommended that people considering starting a business should go and interview the five most successful people in their area who ran similar businesses.
If your business does not market locally, use the internet. Find business models, or even business plans, for a typical business in your industry. Put together a profile of the competition.
When defining competition, it is sometimes not enough to look at businesses selling the same product. A key question to ask is, who else is competing for the time and dollars of your target market. For example, Starbucks caters to the young, working professional. What are their alternatives to visiting Starbucks? They could go to another coffee shop. They could go to a juice bar. They could meet in a restaurant. They could skip coffee altogether and switch to designer water!
Almost every industry has an association. This is a great source of information about the industry, and often has already done the competitive analysis.
If you are going for outside investors to help start your business (or even if you aren’t,) you should know their key concerns. One of the questions they will ask you is how you will make money in your business, faster, smarter, better than anyone else?
Here’s a saying to think about:
“Good artists borrow. Great artists steal!”
