IT and Business Insights for SMB Solution Providers

Ignore Your Competition - Not Your Clients. Part 1

Among the things that gets me in an argument from time to time is my commitment that you can absolutely ignore your competition if you are in small business.
Before anyone gets picky about what constitutes a small business, please note that almost every business is a small business. Ninety percent (90%) of all businesses have twenty or fewer employees. Fifty employees gets you to the 95th percentile and a hundred employees puts you in the 98th percentile. So, if you're reading this, you probably run a small business.*

A lot of business advice is completely focused on big business. This includes the somewhat-generic advice that you should do extensive research on your competition. This includes both specific companies and the industry as a whole. That advice might be good for the five percent, but it's bad advice for the 95%.

Personally, I think it's bad advice for large businesses, but I know for a fact that it's bad advice for small businesses. There are several reasons for this.
Perhaps the most important reason is this: "Competition" doesn't mean what you think. Many people assume that competition simply means everyone who's in your business. But that can't be true. There are people in IT consulting all over the world. Do you think they affect you and your clients? 
So, let's narrow down the discussion to those in your town. But you can't even name all the people in IT consulting in your town. I can't tell you how many times I've met someone at a conference thousands of miles away from home and found out that they are SMB IT consultants in Sacramento, CA. And I run the local IT user group!
Okay, it's not everyone in your industry and it's not people in your industry who are in your city. Is it companies you go up against for bids/jobs? Yes, you can count those people as your competition. And then there's the slim  chance that someone is actually trying to poach your existing clients. You can count them as well.
In my experience (which goes back twenty-six years, several hundred clients, and three consulting companies), this group of "competitors" is microscopic. On one hand, I have participated in perhaps two competitive bid situations per year. On the other hand, I've hand maybe three poaching attempts ever.
These things exist. But I hope you see it's an absolute waste of time and energy to pay attention to these folks. You certainly should not study them, find out what they charge, analyze their offering, and spend thousands of dollars gathering detailed information about them. What would be the point? You cannot build a business based the behavior of these few companies. Besides, would you even do that? 

What's the Point of Analyzing the Competition?
What do people mean when they say to analyze the competition? Generally (and this comes from the world of very big business), they mean that you thoroughly analyze the market; know how many potential clients there are; understand everyone who operates in your space; and find out exactly how much everyone is charging for everything.
Holy smokes, Batman. What a waste of time. First, almost all of that information is unknowable. By the time you finish this massive project, twenty percent of the businesses in your geographic location will have gone out of business, and the other seventy-five percent will have grown, shrunk, or morphed into something else. The best you can hope for is a snapshot of what the market was like a year ago. And how will that change your behavior?
Second, you don't need to take over the world. You need ONE new client. One new job. One new project. Go get that. And for that one job, the economy is irrelevant, the market is irrelevant, and your "competition" is irrelevant. You just need one new client. And when you have that client, you need to go get just one more. Rinse, repeat.
Third, and we'll come back to this, if you copy your competition, the best you can hope for is to be just a little bit behind them. In other words, you'll be a bad copy of them. Not quite as good. Not quite as successful. Not quite as profitable.
Is that the benefit you hope to gain from studying your competition? You want to be an awesome second place?
Instead of wasting energy thinking about the competition, spend your time improving your business. How can you give greater value? How can you serve clients well? How can you be more productive and more profitable? Take all that attention you were giving to the competition and give it to your clients instead.
Here's the good news: It's probably the case that you actually haven't wasted your time studying your competition. It's a big, difficult undertaking. So now you can take my advice and stop worrying about it. Whenever you're tempted to worry about what your competition is doing or what they're charging, you simply move on and think about something else. In fact, you can intentionally set a trigger for yourself: Whenever the topic of competition comes up, you can use that as a reminder to think about how to improve your clients' experience!
Stay tuned. In the next installment, I'm going to talk about the greatest myth around competition.
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* On business stats, see this spreadsheet:
Note: If you don't know how to read this kind of data, don't argue with me. I simply won't engage.
:-)

About the Author

Karl W. Palachuk, is a technology consultant, author, speaker, trainer, and coach. He is the author of fifteen books. He has built several successful businesses, including two managed services companies. His books include Managed Services in a Month and The Network Documentation Workbook. Karl is a frequent trainer and speaker in the SMB Community. His popular blog can be found at SmallBizThoughts.com. He has more than twenty years experience as an I.T. professional and serves on advisory panels for several hardware and software companies.

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