Startups: Dealing With The Competition

Someone once told me at a tech meet-up some months back that competition is the best way to judge if an idea is good or bad. “When there are other entrepreneurs interested in building a similar product to what you have, pat yourself on the back and get to work” he said.

Competition is everywhere these days, some startups fail to keep up and ultimately fold, see wesabe. A different case study is box.net and dropbox, two online collaboration and file sharing platforms that have done just fine. Competition can be really healthy, amongst other things I think it actually pushes companies to work that much harder.

Dealing with competition is never easy, it could get very frustrating because one minute you think you have your market under control, and the next minute a competitor has “pulled the rabbit out of a hat” and there’s more demand for them than for you. Many times during the startup journey, you are bound to have nights you look at your numbers and just want to call it quits. Your ability as an entrepreneur to deal with nights like these and handle competition will ultimately decide if you’ll succeed or not.

Strategy and branding are two major talking points for startups when you are about to go into business. Your strategy principally is how you plan to disrupt the market space and forge your way to number 1 while branding is simply how you position yourself in front of (potential) customers and competitors. Every startup has a duty to get both right if they are to make themselves into a force to be reckoned with.
Your strategy is especially crucial in regards to how you deal with competition. Have you set yourself up in a way that interests your niche market? Or have you set yourself up as a similar entity to what this niche market is used to and comfortable with a.k.a. your already existing competitor.

In my experience with startups, I have learned to see “strategy” from two stand points: short-term strategy and long-term strategy. The way I see it, short-term strategy represents how you intend to get your foot in the door if you are a new startup. It is the plan you lay out for how you want to gain recognition over the next 3-6 months. Long-term strategy on the other hand is your plan for future success, it’s how you plan to go from “new kid on the block” to number one in your industry. Either way, how you set up yourself for success has a lot to do with how your start-up reacts to competition posed.

In late 2009, I was approached by a very enthusiastic “startup junkie” like me who had just started an ad serving startup for a streamlined audience. As you might already know, this space is extremely congested and having any sort of impact is especially difficult. The startup was bootstrapped and really needed some sort of revenue to keep going and potentially attract investors. I teamed up with him and handled the non-technical side of the company while he focused on writing thousands of lines of code. Our need for something worthwhile forced us into creating a short-term strategy in addition to the long-term plans we already had in place. The idea was to find a few specific blogs that were keen on carrying ads appealing to the same audience we were reaching out to. We knew they already had a company serving them ads or had Google adwords running, but with most of them they had some space ‘under the fold’ that was blank and we took advantage of that. We convinced them to let us serve them ads on this small space and test us out to see how well we did for a short contract. After numerous emails, we landed a couple of clients, most of whom signed us on permanently.

Take note: In the short-term, you might need to work along with competitors to survive. You won’t be the first nor last to do it. Rome wasn’t built in a day, you won’t build your company today and tomorrow you are on the Forbes list of top 10 startups.

To successfully deal with competition, here are a few things to add to your checklist.

Know your competition – I have this thing I do whenever I am working on a new project, I spend a few days finding our competitors. I make sure to have each of them on a spreadsheet, their numbers, strategy and so on. Then I try to update at the end of every month. This makes me aware of what our competitors are doing to try to outshine us. It’s important to study their brand, what the company does, their
customer reach and importantly, how the score their customers. If you are going to fight them, you might as well know their strengths and weaknesses.

Learn from your competitors but never ‘bad mouth’ – My favorite thing about competition is being able to learn new ways to implement and forge ahead. I see a lot of companies spending their money and valuable time creating PR/marketing campaigns that attempt to ‘bad mouth’ their competition. Like most people I know, I think this is borne out of insecurity and lack of creative depth. If you are confident in your product and you are smart, there’s really no reason to ‘bad mouth’ any one. It’s okay to point out positive differences but not okay to talk about them in a negative light.

Find what the (potential) customers are passionate about and give them more of it – There are many ways to win over customers without it having to do with the cost of service. I know a company that outsell their competitors simply because they host quarterly meetups at their HQ is San Francisco. Sometimes, your customers want to feel involved, they want to interact with this company they patronize and kudos to the marketing dept. at that company, they figured out the cravings of their market and gave them what they wanted. Interaction. Your job is to find out what your market is passionate about, and use it to your advantage.

Price/Cost has nothing to do with you beating your competitors – Fact, if I want to revamp my blog, I won’t go out looking for the cheapest bid, I will go out looking for the best value at the best price. I won’t look for a designer with less than average skills and have him design my blog because that simply paints me in a bad light. That blog is my brand, it shows people what I am about and if what I am about is a poor quality website, then how do I expect to be perceived? Same goes for companies and individual customers. If you give them a reason why your product is a certain price, they more often than not will end up buying regardless of price. It is simple, value over price. Does your product have better value than that of your competitors? (even if your price is higher), do you give me something I want beyond the basic, that the other companies aren’t offering me? These are factors that often make a sale or not, more often than cost of the product.

In a nutshell, there will always be competition. Your ability to swim rather than sink under the threat they pose is up to you.