Of all the factors that affect your business' success, one of the most RANDOM ones is the quality and quantity of your competition. If you are unfortunately located in a town overloaded with quality competition, your income is going to be capped one way or another no matter how good you are.
If you are trying to build your business in a market saturated with quality competition, your margins will constantly be under great pressure. You will constantly be fighting for volume at the prices you wish to receive.
However, if you are lucky enough to be located in a town with poor quality or non-existent competition, you're probably going to do very well, no matter how good of a businessman you are. In a market without strong competition, you should be able to charge almost whatever you wish. Scheduling your work should be your biggest headache.
Life really isn't fair. Land in the right market and life is easy. Land in the wrong market and life is rough.
You probably are wondering whether we are suggesting that competition is one factor beyond your control. We are not. The intent of this article is to persuade you to put some effort into competitor research and adjust your business strategy accordingly.
The cold hard truth is that if you are chasing the same targets as several other contractors, and they can meet customers' needs almost as well as you, then it's time to change direction. You will need to find customers have needs that only you and a couple of others can meet.
How Strongly Did You Consider Your Competition Before Opening The Doors?
If you truthfully answered thoroughly, you are in a tiny minority.
Renowned consultant Rich Schefren has observed that few business owners adequately investigate their competition before launching their business venture. Business owners often discover that the world wasn't in as dire need of their solution as they thought.
They discover that aggressive marketing and selling are going to be required if their financial goals are going to be met. They discover that growing the business isn't going to be the cake walk they thought because they will run into serious competition every step of the way.
You've probably already launched your business, so we're suggesting a different reason than Rich for performing competitor analysis: to make sure that you are chasing clients who don't already have a pack of wolves on their heels.
Key Questions to Answer about the Other Guys
The first step is identifying which questions need answering. Here they are, for the most part:
- What is the owner's background and how long has he (or she) been in business?
- What are the owner's strengths and weaknesses?
- How strong is the management team?
- What work do they chase?
- What are their annual sales?
- What are their gross margins?
- What services do they offer?
- What size of projects do they do?
- How do they advertise?
- What do they say on sales calls?
- What is their reputation?
- How do they go about their work in the field?
- How is their quality?
- Do they over-promise or over-deliver?
- Who does the owner run with socially?
- Is the owner risk averse or a gambler?
- How much turnover do they suffer?
- Have they been growing or shrinking?
- Are they a MBE or WBE?
- Are they a union shop?
- Is the owner overly-extended or is he sitting on a ton of wealth and cash?
- Who are they in tight with?
- Is their equipment old or new, sound or broken down?
- How good are their field leaders?
- What is their backlog?
Long list, eh? It's not even complete. The more you can learn about your competition, the easier it will be for you to identify market opportunities and close sales leads.
Your next step is the HOW piece.
How to Research Your Competition
You have your list of questions to answer, now you need to go get the answers. Here's a list of information sources that may or may not have occurred to you.
The magic phrase to embrace is "JUST ASK."
Some people will happily share what they know. Others will think your question to be inappropriate. Don't worry about the latter, unless they are a customer. Walk softly around customers.
Here's the list, then we will give you a tip or two for approaching each:
- Other contractors
- Former Employees
- Watch their crews.
- Their marketing materials
Specifically, talk to the trades that follow them in the construction sequence. This will be your best source of information. They know how well their field crews are run.
They know how well the work gets done. They know whether the company encourages corner-cutting or not. They know whether proper safety procedures are followed. They know whether crew staffing and turnover is a problem.
Also remember that contractors talk to each other and to their suppliers. They'll probably know whether your competitor is in financial trouble.
This category also includes insurance agents and bond agents along with material and equipment suppliers. Chat up the suppliers' sales personnel. They are the most likely to share information - unfortunately about you too!
Find out whether your competitors pay their bills on time and whether they have been buying a lot of equipment? Find out whether they prefer to buy or rent.
This includes prospects. Arrange for one of your most trusted clients to take a sales call and a proposal from your competition. Debrief with your client. Learn what they did and didn't like about the sales call. Gather up the marketing materials and proposals let with them.
If you can, get their clients talking. This isn't so easy, carries risk, and may produce misleading information as the truly happy clients will keep their mouths shut while the unhappy clients will sing like birds. That would give you the mistaken impression that your competitor can't keep his clients happy when they actually do.
Bankers typically are a tight lipped group. Your best shot at information gathering is going through your own banker and seeing if he or she will pick up anything through their network.
Now here is a group to tap. Employees almost always know what's really going on in a firm. Former employees are usually happy to spread the dirt as few have loyalty to their former employers.
Field workers will be able to tell you how well organized their field crews are. Office workers will be able to tell you the spending habits of the owner, the culture of the company, and the manner in which the owner operates.
Watch Their Crews
Why? Because you will get a feel for their productivity, quality, and professionalism. These three factors are strong determinants of your competitor's ability to compete on cost and maintain customer satisfaction.
Their Marketing Materials
Read their website. Collect copies of their brochures, business cards, fliers, advertising materials, and proposals.
Look at the signage on their equipment. Read their Yellow Pages and Blue Book advertisements. Keep a close eye on the ones who have well crafted marketing messages. They probably are also good at selling and pose a serious threat for the higher margin work.
Additional Research Resources
Some of these are a little more extreme. We are not advocating all of them, just sharing the list with you. Use sound judgment in your selection of them.
Pull up a Dunn and Bradstreet or Hoovers Online report on the business. Pull a personal credit report on the owner if that is allowed in your State of residence and the State in which the competitor resides. Call the Better Business Bureau.
Check for lawsuits, liens and tax judgments.
Not sure where to start or how to go about collecting this competitive information? Give Ron Roberts or Guy Gruenberg a call (Ron: 913-961-1790 or Guy: 708-774-6500). Ron and Guy are experts at creating great sales organizations, developing strategic and tactical processes, and bringing the people together in a culture that achieves instead of clashes. To receive the FREE Contractor Best Practices Newsletter visit www.FilthyRichContractor.com