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."