Marketing April 14, 2016 Last updated September 18th, 2018 532 Reads share

Why Your Competition Is Dangerous

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Business competition is exactly like competition in sports: There’s always someone better, faster, or more talented coming up behind you. And, if you take your eye off of what you’re doing to worry about them, you’ll stumble and veer from what was making you successful in the first place.

In your startup business, you should look and see who your competition is.

Who is dangerous?

Worrying is not your friend, but knowing who poses a threat is useful and wise. Let’s talk about the size of a competitor and how that makes them dangerous.

The Big Ones 

Big competitors are dangerous because of their many resources and momentum. Their large customer base usually provides them with a large, steady cash flow.  When a company has a large and steady cash flow, they can overcome committing a multitude of sins. They can take risks that other companies can’t. They can even undercut you in price to take a loss because they know they can absorb the business expenses over the long run.

Even so, I’ve really never been too concerned about big competitors, because I have worked in a big company, and I know that they eventually will trip over their own bureaucracy. Remember what I said about momentum? That’s both a good and a bad thing. If you’re a massive ship on the ocean, your momentum is great so long as you’re headed in the right direction. But if you’re not, think about how long it’s going to take a massive ship to change course!

Big competitors are slow to react. In fact, that’s why a lot of small business exist— small business serve the customers that large businesses don’t see a scalable profit in. I’m willing to bet that you knew there were large players out there in the market when you started your small business. It didn’t stop you then, so why should it stop you now?

The Small Ones

Small competitors can be more dangerous than the big competitors. If you’re a small business owner you may not think of yourself as dangerous, but, believe me, you are. Here are a few reasons why …

  1. “Pressure Causes Speed”: Typically, they have little or no projected cash flow. Therefore, they have to make sure they maintain a slow “burn rate,” meaning that they need to make their cash last as long as they can. Investors and lenders usually are not very patient, which causes a terrific amount of pressure on the individuals involved. This pressure causes them to move with great speed and agility, as if their very [business] lives depended on it. And, honestly, it kinda does!
  2. “Clean Slate”: Small businesses have few (if any) old legacy systems or old procedures that they must maintain as they press forward. Instead, they’re free to create shiny, new offerings using the newest technology available.  Although their offerings may be a lot of “smoke and mirrors,” they may look good enough to attract unsophisticated customers, which simply buys them more time to “get their act together.”  
  3. Have Nothing to Lose”:  Since they’re on the ground floor, usually broke, and without many customers, they realize that they really have nothing to lose.  After all, they’re already broke. Their business is comprised of duct tape and bubble gum, so what’s the big deal about violating a few employment laws (like misclassifying independent contractors vs. employees, and having them work really long hours)?  What’s the big deal if they don’t properly file all of the government paperwork they’re supposed to file? After all, they’re so small, their odds of getting caught are almost nil, right? They have nothing to lose by taking extreme risks!
  4. “Have Everything to Lose”:  They know that time is not on their side. They know they must produce results quickly, otherwise they will lose everything.  This pressure creates a tremendous amount of motivation throughout their company … both for the owners and their employees alike.  In these extreme pressure-cooker situations, most of the employees will have an “all-in” mentality.  And when employees join the business owner in this “all-in” mentality, the company becomes nearly unstoppable.
  5. “Custom everything” : Small business owners are a custom by default. They have no best practices or efficiency routines. They can offer to do just anything for anybody because they’re usually not sustainable to the point of turning away potential business in any shape or size. This may cost them later on, but, at the start, it gives potential customers (maybe you potential customers) more bargaining power, and less incentive to settle for a one-size-fits-all offering.

Heart and hustle

Before you start your business, that’s the time to survey the playing field and decide if there is a place for you, your product, and your service out there. If there is, and you’ve decided to go for it— GO!  Jump in, play your game, create your own flavor, add your own twist, and don’t worry about the competitors around you. Remember, when you’re focused on what you’re doing, you’re at your most dangerous to your competitors!

Watching the competition can be useful for understanding what new conditions are entering your business environment, but worrying and oversteering based on their activity can be a serious misstep. Big competition is slow and looking to serve the majority, not your niche. Small businesses are chaotic and unpredictable. At the end of the day, the only outcome you can absolutely control  is the amount of effort you put forth.

Images: ”We are in a competitive business. We are in a competitive business. Two businessmen arm wrestling. Modern office background.  /Shutterstock.com

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Mike Kappel

Mike Kappel

Mike Kappel is the president of Patriot Software, LLC., which develops online accounting and payroll software for small business owners. He has also founded four other successful small businesses, and he is passionate about helping other entrepreneurs find their way to success

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