Do you know who your business is competing with? Have you looked at a Business Competitor Analysis? As Small business owners, we often get this very wrong. There are 4 main business competitors every small business has, and it is vital you know who they are.
Business Competitor Analysis: Who are you competing against?
- A direct competitor
- A substitute
1. Direct Competitor
This one is relatively straightforward and where we often give much of our attention. If they don’t choose you, then your client can elect to buy from a direct competitor, which is another business very much like yours that sells the same product or service.
This is where your client solves their problem (i.e. the problem that your business solves) with a substitute instead of a direct competitor. This can be a major blind spot for business owners, the inability to recognise a substitute as a threat to their business. Take coffee as an example, a direct competitor to a good barista is the other good barista across the street. Still, a substitute would be Red Bull from the convenience store nearby. You need to understand what the substitute competitors are for your client.
Your client (in many cases) can ‘do it themselves. Maybe not as well as you can do it for them, but they can still get a result, electing not to buy from you but instead solve the problem on their own. This will be a big threat to accountants in the coming years as the ATO makes it easy for people to lodge their tax returns, for example. People can build their websites, do their marketing, train at the gym, buy a book, or Google the solution.
The last one is apathy, where your client just does nothing at all and puts it off temporarily or indefinitely. For some of the products and services, the client doesn’t need to engage even if there is a good reason to do so.
Why is it important to know exactly who your business competitors are?
It is crucial because you need to know your real competition to design your marketing and sales spiel to suit.
So who is your competition?
Out of the last 10 or 20 clients you missed, work out what percentage of those clients you lost to each of the four areas of competition. Then review how you market and sell. You may need to ask yourself are you addressing the right competitor, or do you need to change your approach?
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