Competition amongst businesses, and people, can be energizing and productive. Competition allows us to keep our eye on the ball and consider on a regular basis what others are doing in our space to be successful. Competition can be a healthy part of your business growth.
What happens when other like-kind businesses enter the marketplace, and even <gasp> market to our own customers?
I think it is a natural inclination to react to competition by verifying and validating your value to your customer base. I would even bet that if you have experienced a competing business in your market that you went on the defensive. You drove by their shop, and even sent a “mystery shopper” inside to spy. You probably tried to find out what their “special offers” are, or what they are doing differently to stand out. You would then immediately pass of these new ideas as “fads” and “temporary.”
Here is where competition can help us. Competition should always be considered, even if there isn’t an immediate threat in your market. You should always be working to improve and win over your customer base on a constant and continual basis. What else keeps you on your toes?
As we delve deeper into our competition, I want to ask you the following:
Who are your competitors? They might not be who you think they are. For example, who would have thought that your phone would be the competitor to your TV?
What makes your competitor your competitor? Identifying how and why your customers use your goods or services is key.
Are you a one-time purchase, or something that is needed on a frequent basis?
How easy is it to buy a product or service from you?
What does the sales experience look like at your business?
What does your follow up time after a sale is made look like?
I hope you are using these tools on a regular basis to evaluate your business experience, and not only when the threat of competition is looming.
Let’s switch gears and talk about synergy. Like-kind businesses can also be synergistic. If you take a look around the community you live in, you will probably notice many synergistic business that are located right next door to each other. Take the home improvement industry. In most communities, there are multiple home improvement stores located on opposite corners, or within blocks of each other. Why does this happen you ask? Because of synergy. While two businesses may appear to carry the same products, more than likely if a customer can’t find what they are looking for at one home improvement store, the other one will have it. These two businesses are relying on the customer base in that community to shop at both, for different reasons. One store might offer a better supply of lumber, while the other might feature more garden items. The same can be said for the banking industry. How many high traffic intersections are home to more than one bank or credit union? What appeals to one customer base can create an appeal to a different customer base for different reasons.
What are the lessons learned here?
Continually evaluate your business to determine its strengths and weakness so you won’t even have to defend it to a new competitor.
Determine what your business does best, and create synergy with those around you. It is a-ok to be a specialist, and not be a “one stop shop.” Decide if those synergistic businesses can create a referral network for you, instead of trying to compete.
I love getting a little extra. The extra shot of espresso or added whipped cream to my coffee drink, the discount for being a frequent customer, and even receiving some free expert advice – it adds up over time when I am considering how to patronize the businesses in my area. As business owners, when do you provide value (for free), and when do you ask for a commitment (by way of a financial payment)?
Being in commercial real estate, having additional experts on speed dial is a great added benefit to my clients (who are business owners) and for my own business.. A few areas of expertise that I value in my business is that of an attorney and a CPA. Reviewing complex real estate contracts, to evaluating how a business is established (or dissolved) and the profitability model are some of the areas I like to lean on my expert friends for. Over the years, I have had these experts provide a quick insight or perspective to my clients, as well as develop long standing and profitable (for both sides) relationships. When I followed up recently with one of these friends, I asked him how he determined how much advice to provide up front without the expectation of a fee?
That can be a tricky question for a lot of us. If you are in real estate, like me, your paycheck doesn’t come until the business is fully complete (and sometimes not at all if a deal falls through). For others, a payment structure is established at the beginning and an invoice is provided for payment for the time it took to complete the job – whether the outcome was good or bad. If your business sells a product, then the exchange of payment for the product usually happens at the same time (unless the product needs to be ordered, then payment is usually placed up front and the delivery of the item comes later).
As business owners, we need to carefully consider how much up front value is comfortable for each of us. Here are some things to evaluate about your business:
Will up front value increase the propensity for a sale?
Will up front value create a higher sale?
Will up front value set you apart from your competition?
Is there a cost to providing up front value?
I am asking you to think about value in a little different terms. For many years, the term “value added” was the norm. I think it was a very popular fast food restaurant to coined the phrase “do you want fries with that?” The value add proposition was born. In this day and age, value can be tangible, but value can also be perception. The expectation of value needs to be established at the start, so the buying decision can then commence.
The beauty of our businesses is that we can determine what value we can and want to provide. What you may become surprised with is what your customers actually are willing to pay for. Those “value add” offers could work in your favor if structured and marketed the right way.
Nobody likes the unknown. Right now it is hard to forecast, and it is hard to know when a good decision is a safe decision. Here is what I can tell you, and hope to provide you with some control and confidence in your business:
Business ownership will always have risks. The economy will always go up and down, and your client needs will also evolve. I want you to embrace the fact that change and risk are part of life and definitely part of business. Things will be hard, and then opportunities will bubble up. You can prepare and plan for those stormy times, and have the confidence that it will get better.
Take the opportunity to dig deep and evaluate how you conduct your business. Many of us have been forced out of our normal working spaces and into a remote or home based environment. What is working for you now? What was a challenge, or continues to be a challenge? I want you think about even those basics like: How do you use technology? How do you use your personal office space? What have you found that was a surprise, and you may continue using it once we are back to “normal”? I know for our office, the ability to communicate quickly and through a variety of technologies (like: MS Teams and Zoom) will be mainstays once we return.
What can you do without? Major changes, especially sudden changes like the COVID pandemic, create a scarcity mindset. You may have found that those “must haves” are no longer even basic needs. Can your business survive, and even thrive, without those former expenses? Have you realized some savings in your business that you could then reallocate elsewhere?
What do you need to invest in? This is a hard one during this time, but one area I want you to carefully consider. You need to ALWAYS be evaluating your business to make sure it is healthy. It is too easy to get busy (and who doesn’t like a busy schedule with lots of business coming in?), and not pay attention to the foundation of where you want to go. Being aware of upgraded technologies, making sure your security measures are up to snuff, and also ensuring your communication strategy to your client base and prospective client base is top notch. Without it, you will quickly be behind should another economic dip occur. If you have the means, create a strategy for investment. Believe it or not, NOW is the time to invest in infrastructure, best practices, and strategic initiatives. You will create a more solid, successful business if you use this time to maybe not do things the way they have always been done.