How to cope with business competition
In the area of business competition, there’s one thing I’ve learnt over the 32 years I’ve been at the coalface of advising SMEs. No matter how many other competitors there are in your line of business, you can still be successful if you get your core business activities working the right way.
The best example for that locally are cafés, which are springing up all over the place. Some are busy all the time, some are deserted. Yes, location and being on the sunny side of the street are both important, but there’s a lot more to it than that, especially when the deserted ones are in good locations.
So, does that mean that you can ignore the competition and carry on? A lucky, super-successful few can — maybe — but not the majority of us. Not only can we learn many things from our competitors, but in addition, nothing stays the same in business for very long so it’s vital to know what’s happening out there.
- The first thing to do is find out more about the competition. Once you’ve learned all you can, you can avoid the mistakes your competitors make but build upon the things they do right.
- The mistake that many in business make is to just do the same old things the competition does, often because they used to work for the competitors. If you want to succeed in business, it’s necessary to differentiate yourself. Do you have an effective unique selling proposition (USP) built around the key frustrations that customers or clients suffer in your line of business? Have you looked at the way you do things and asked yourself whether they can be improved and made more efficient, or do you do things the same old way because “that’s the way we’ve always done things around here”?
- Keep close to your customers and clients and know what they want. When was the last time you carried out a customer survey or organised a Customer Advisory Board? If you haven’t heard about these before, look on Google. It’s best to use surveys or boards hosted by a third party so that customers tell it like it is. A mentoring client of mine convinced themselves their business premises were fine after asking two customers in passing, whereas, in fact, the whole place needed a complete modernisation. Would your customers tell you the truth face-to-face?
- If you have lost customers and clients to the competition, find out why and what, if anything, you’ve done wrong. Was it an isolated incident or more prevalent? Were you too slow, too expensive or too cheap, or did you fail to put something right when things went wrong? Do you have a customer complaint procedure? What about a guarantee which doesn’t just relate to products? For example, my firm offers a 100 percent fee guarantee so if the client is unhappy, they don’t have to pay. Isn’t it better in the longer term to lose a bit of money than lose your business?
- If price is a big factor, you may have to cut your prices, but it’s unwise to do so unless you can source a less costly supply or re-arrange the way you do things to reduce your costs. Discounting is a recipe for disaster for many small businesses because at average gross profit margins, you will have to increase your sales substantially to make up the shortfall in profit. Instead, look for ways to add value but keep prices the same.
- Diversify and offer more services. For example, if you’re a pet shop you could set-up some joint-venture marketing arrangements and offer things like pet grooming or doggie-washing, dog obedience classes, doggie day care or pet insurance. You could become a one-stop shop for all the customers’ needs, like a real estate agent that can arrange your mortgage, rent out your house or put insurance in place for you.
- I find that the businesses that complain about the competition the most are twilight businesses like traditional retailers. Like it or not, if you’re unable to reinvent yourself, perhaps it’s time to move on.
Many competitors are large unwieldy national businesses with substantial cost bases, where change is difficult and expensive. Changing direction and getting things are done is much easier for SME’s. Take advantage of that and embrace change before it’s too late.