If you don’t fail now and again, it’s a sign you’re playing it safe.
Competition is tough, but it can also benefit you if you know how to make the most of it. No one has a patent on great ideas, so watch your competitors closely, and when you see them doing something you can legally do as well, go for it.
I was working with a service company that had been struggling for four years. They were barely making enough profit to draw a small salary. Before I came to help, the owners had been constantly searching for ways to improve their profitability, and I tried everything I knew, from setting up budgets to raising their prices.
But even with all this effort and diligence, they were stymied at every turn. They just were not able to improve profitability by any meaningful amount, and it was affecting their pocketbook as well as their confidence. They refused to give up, however, and they kept on working to improve their operation.
Eventually, they started looking at how their competitors were charging for their services. While this firm was charging by the hour, they did not start the clock until the technician arrived at the job. Their competition, on the other hand, was charging by the hour beginning when the technician left for the job.
Once they had this revelation, they quickly changed their billing practices and were surprised that none of their customers ever questioned their bills. It is standard practice to bill this way for this service, and customers understand that.
Recently, I ran across the entrepreneur at a golf tournament, and he said he had great news to tell me. He shared that his firm’s profits were up more than 75 percent and it was all because they made this one small billing change.
Another struggling entrepreneur discovered that his product line was not as broad as his competitor’s. All he had to do was match the competition’s offerings and his profits soared. It was well worth the small cost of adding these additional products.
Regular reconnaissance of your competitors is so important to your business and your profitability. Some entrepreneurs might think of this as stealing, but it is just part of being in business, and there is nothing wrong with it. Take McDonald’s and Burger King for example. They keep constant tabs on their competition so they will always know how the other is operating and if they are being successful.
One of the simplest and most effective ways of doing this is calling them—or having a friend call them, if you prefer—and asking a few simple questions about their operation. Some good questions are as follows:
- What rate do you charge and for how many workers?
- When does time start?
- What type of guarantee do you offer?
- Where can I see reviews of your work by past customers?
- How many years of experience does your average worker have?
- What type of insurance do you carry?
- Ask them what they think of your firm.
Of course, these are just a few suggestions. You can easily modify this list to be relevant to your specific type of business. The point is to gather as much information as you can.
Now go out and make plans to acquire this competitive knowledge.
Do you have any other tips for small business owners looking to keep track of their competitors?
Published: August 28, 2013